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Dabur: Consumer care supports growth - Views on News from Equitymaster
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Dabur: Consumer care supports growth
Jul 27, 2009

Performance summary
  • Consolidated net sales grow by 22% YoY during 1QFY10 on the back of strong performance in the consumer product division, where sales grew by 25% YoY.
  • Operating (EBITDA) margins improved to 16% due to the impact of lower raw material prices (as percentage of sales).
  • Net profits grow by 29% YoY while net profit margins expand by 0.8%. Growth aided largely by higher sales and improved operating margins.

(Rs m) 1QFY09 1QFY10 % Change
Net sales 6,111 7,473 22.3%
Expenditure 5,168 6,245 20.8%
Operating profit (EBDITA) 943 1,228 30.3%
EBDITA margin (%) 15.4% 16.4%  
Other income 49 32 -34.8%
Interest 40 37 -8.9%
Depreciation 117 123 5.8%
Profit before tax 834 1,100 31.9%
Minority interest (1) 4  
Tax 127 190 50.1%
Profit after tax/(loss) 707 913 29.3%
Net profit margin (%) 11.6% 12.2%  
No. of shares (m) 865.0 865.0  
Diluted earnings per share (Rs)*   4.8  
Price to earnings ratio (x)*   28.0  
* On a trailing 12-months basis

What has driven growth in 1QFY10?

    Consolidated EBIT margins
      1QFY09 1QFY10
    Consumer Care Business 24.3% 24.3%
    Consumer Health Business 25.4% 26.0%
    Foods Business 13.8% 12.9%
    Retail Business na na
    Others 4.4% 4.4%

  • Dabur continues to post strong volume based growth. The company posted a volume growth of 16% for the quarter while price increases accounted for 4% of growth. The balance 3% came from currency gains.

  • Consumer Care Division had a strong performance this quarter with 25% growth. Hair care business performed extremely well with high growth witnessed in the Hair oil and shampoos business on the back of increase in promotion. Oral Care portfolio grew on launches and relaunches while health supplement division grew on the back of increased promotions and new packaging. Digestives witnessed strong growth thanks to aggressive distribution and launching of packages at attractive price points. Skin and baby care business also saw strong growth in sales on the back of Gulabari. Home care grew on the back of good performance by Sanifresh. Sales of food business increased due to increase in promotions.

  • Consumer Health Division clocked growth in late teens with all round performance by the brands.

  • The international business saw strong performance from the Gulf countries, Egypt, Bangladesh and Nepal with sales growth of over 60%. Performance in Nigeria and Pakistan were disappointing with Nigeria sales being impacted by currency depreciation and Pakistan by its internal unrest.

    Division performance
    Segment Growth Key performers
    Hair oil 15.80% Dabur Amla (14.3%), Anmol Coconut (42.7%) , Vatika (15.5%)
    Shampoo 48.60% Vatika brands
    Health Supplements 17.20% Glucose (34.1%) and Dabur Honey (15.0%)
    Baby and Skin care 19.70% Gulabari (47.2%), Lal Tail (3.9%)
    Oral care 7.80% Babool (22.8%), Red toothpaste (18.4%), Meswak (31.8%)
    Home care 7.90% Odomos (6.0%), Odopic (19.5%), Sanifresh (50.0%)
    Foods 21.60% Real Fruit juice incl. Activ (17.7%), Culinary range (37.8%)
    Digestives 18.40% Hajmola tablets (18.3%), Hajmola Candy (18.3% )
    Consumer Health Division 12.50% Honitus (5.6%), Asavs (9.5%), Pudin Hara (33.5%), Churnas (9.8%)

  • The consolidated operating margins saw improvement of 100 basis points in spite of rising advertisement costs due to falling raw material prices and lower staff costs.

  • The 29% growth in net profit was aided by growth in revenue and higher operating margins. However, the growth could have been much higher if not for higher tax expenses.

What to expect?
At the current price of Rs 134, the stock is trading at a multiple of 21 times our estimated FY12 earnings.

The company has witnessed strong volume growth in all its categories. Although the advertisement rates were higher as a percentage of net sales, the operating margins increased due to lower staff and raw material costs. Going forward, we do not expect the company to maintain such a high growth rate in its international business. With the acquisition of Fem Care, Dabur has become the third largest skin care product company in India. However, the company is still in the process of formulating its strategy for positioning The Fem care products. We will wait and watch how Dabur benefits from this new acquisition.

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