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Dabur: Consumer Care business fuels growth
Jul 26, 2010

Dabur India Limited has announced its 1QFY11 results. The company has reported a 20% YoY and 21% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Consolidated net sales for 1QFY11 increased by a robust 20% YoY on the back of strong performance by the company’s domestic and international business.
  • Operating (EBITDA) margins remained flat during 1QFY11. This comes on the back of higher raw material costs as well as higher advertisement spending offset by lower staff costs and lower other expenditure (all as a percentage of sales).
  • Net profit for 1QFY11 increased by 21% YoY. This increase is on the back of growth in operating profits and fall in interest costs. The net profit growth could have been higher but for an increase in effective tax rates.


Consolidated picture
(Rs m) 1QFY10 1QFY11 % Change
Net sales 7,731 9,251 19.7%
Expenditure 6,523 7,798 19.5%
Operating profit (EBDITA) 1,207 1,454 20.4%
EBDITA margin (%) 15.6% 15.7%  
Other income 32 36 12.7%
Interest 31 8 -74.4%
Depreciation 130 145 11.7%
Profit before tax 1,079 1,337 23.9%
Minority Interest (5) 6  
Extraordinary Items - -  
Tax 189 263 38.9%
Profit after tax/(loss) 895 1,080 20.7%
Net profit margin (%) 11.6% 11.7%  
No. of shares (m) 866 870  
Diluted earnings per share (Rs)*   6.0  
Price to earnings ratio (x)*   34.0  
* On a trailing 12-months basis

What has driven performance in 1QFY11?
  • Sales improved by 19.7% during the year. This growth was primarily driven by volumes as the company was reluctant to increase prices so as to improve market share. The growth was led by consumer care business and supported by the international business. Hair oil, health supplements, oral care, home care and foods were the top performers.

    Division performance
    Segment Growth Key performers
    Hair oil 16.5% Dabar Amla Hair Oil (18.9%), Vatika Hair Oil (22.2%), Anmol Coconut Oil (15.6%)
    Shampoo -17.1%
    Health Supplements 42.8% Dabur Chyawanprash (94%), Dabur Honey (17.7%), Dabur Glucose (53.6%)
    Skin care 12.4% Gulabari (22.9%)
    Oral care 20.2% Dabur Red Toothpaste (31.2%), Babool (29.4%), Meswark (14.4%), Dabur Red Toothpowder (2.8%)
    Foods 21.2% Real Fruit Juice (21%), Activ Fruit Juice (21%), Hommade Paste (37.2%)
    Home care 31.5% Sanifresh (33.6%), Odomos (68.4%), Odonil (68.4%)
    Digestives and baby care 14.7% Hajmola Tablets (17.7%), Hajmola Candy (8.1%), Lal Tail (14.2%)
    Consumer Health Division 10.2% Pudin Hara (12.8%), Honitus (3.7%), Shilajit (16.3%), Dashmularishta (19.1%)
    FemCare 8.0% Fem Bleach (14%)

  • Sales of International Business Division (IBD) grew by 28.7% during the year with North Africa and Levant region the top performers. Sales from North Africa and Levant grew by 74% YoY each. Nigeria, Pakistan and Egypt also performed well, growing by 59% YoY, 56% YoY and 40% YoY respectively. GCC’s performance was relatively mute with a growth of 26% YoY.

    Cost break-up
    As a % of sales 1QFY10 1QFY11
    Total raw material costs 46.9% 47.0%
    Advertising costs 15.9% 16.3%
    Staff costs 8.2% 7.9%
    Other expenditure 13.4% 13.1%

  • Operating (EBITDA) profit for the year increased by 20.4%. Operating profit improved as a result of higher sales. While the advertisement spending (as a percentage of sales) of the company increased, lower staff costs and lower other expenditure (as a percentage of sales) ensured that the margins during the quarter remained flat.

  • Net profit for the year increased by 19.3%. This is because of higher operating income and lower interest costs. The growth could have been higher but for increase in effective tax rates as a result of some of the company’s manufacturing facilities exhausting their tax exempt period.

    Consolidated EBIT margin
      1QFY10 1QFY11
    Consumer Care Business 23.9% 22.8%
    Consumer Health Business 26.1% 26.0%
    Foods Business 12.9% 17.5%
    Retail Business -163.5% -69.3%
    Others 2.2% 0.3%

What we expect?
At a price of Rs. 204, the stock is trading at 25.1 times our estimated FY13 earnings (RPro subscribers click here). The company has performed well on the back of its CCD and international business with oral care, foods and home care divisions seeing good traction. However at these levels we feel that growth from a 2-3 year perspective is priced in the stock. We therefore advise our subscribers to be cautious while investing in this counter.

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