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Dabur: Strong offtake continues

Aug 7, 2014 | Updated on Oct 30, 2019

Dabur India Limited has announced its first quarter results for financial year 2014-2015 (1QFY15). The company has reported a 13% YoY and 13% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Dabur recorded a 13% increase in consolidated revenues led by 9% growth in offtake.
  • However, operating margin remained flat as reduced other expense has been offset by higher raw material cost (both as a proportion of sales).
  • Net profits grew in line with topline keeping net margin intact. The steep rise in depreciation charges was offset by lower interest outgo for the quarter.

Consolidated picture
(Rs m) 1QFY14 1QFY15 % Change
Revenues 16,524 18,689 13.1%
Expenditure 14,147 16,008 13.2%
Operating profit (EBDITA) 2,377 2,681 12.8%
EBDITA margin (%) 14.4% 14.3% 0.0%
Other income 331 359 8.6%
Interest 133 101 -24.1%
Depreciation 220 267 21.4%
Profit before tax 2,355 2,672 13.5%
Tax 484 560 15.7%
Minority Interest 10 3  
Extraordinary Items - -  
Profit after tax/(loss) 1,860 2,108 13.3%
Net profit margin (%) 11.3% 11.3%  
No. of shares (m)   1,756  
Diluted earnings per share (Rs)*   5.4  
Price to earnings ratio (x)*   37.9  
* On a trailing 12-months basis

What has driven performance in 1QFY15?
  • Dabur recorded a 13% increase in consolidated revenues led by 12.5% growth in the domestic FMCG business and 18% rise in international operations. The growth was largely contributed by volumes that grew by 8.8% during the quarter. The domestic consumer business saw an 8.3% growth in offtake which is commendable as this the ninth consecutive quarter of over 8% volume growth registered by the company. The health supplements and food businesses clocked the fastest rise of 21.6% each. Strong performance in health supplement business was led by robust growth in Glucose and Honey. In Foods business, Real Fruit Juices has performed well across regions and channels and clocked a growth of 24% with market share gains. Homecare and digestives were the other segments that recorded double-digit growth during the quarter.

  • The hair care portfolio grew by 8.4% with hair oils and shampoos growing by 7% and 15%, respectively. The oral care business posted a growth of 8% led by 10.7% increase in the toothpaste portfolio with toothpowders seeing flat growth. However, the skincare business saw muted growth of 4.4% due to overall slowdown in the category. Even the OTC & Ethicals segment clocked a sluggish rise of 4.4% for the quarter. The company has recently introduced a liver tonic, Hepano, in this segment. The overseas business was led by constant-currency growth of 12.4% with good growth in GCC, Egypt, Turkey and Levant markets. In line with the company strategy, Namaste’s non-US business continued to grow ahead of its US business.

    1QFY15 division performance (domestic)
    Segment Growth
    Hair care 8.40%
    Oral care 8.00%
    Health Supplements 21.60%
    Skin care 4.40%
    Foods 21.6%
    Home care 14.7%
    Digestives 11.30%
    OTC & Ethicals 4.40%

  • The company has kept operating margin in-tact through savings in other expenses and ad-spends (both as a proportion of sales). The other expense to sales ratio fell by 0.5% that has offset a 0.5% increase in the proportion of raw material to sales ratio. Segment wise both consumer care and food business segments have reported slide in EBIT margins during the quarter.

    All round picture
      % contribution Revenue  PBIT  PBIT margin PBIT margingain/(decline)
      to sales growth growth (%) basis points
    Consumer Care  82% 14% 10% 18% -59.3
    Foods  16% 19% 11% 12% -233.3
    Retail 1% 15% -22% -4%  
    Others 1% -38% -25% 5% 81.9

  • Even at the net level, margins remained flat as high depreciation outgo has been offset by reduction in interest charges during the quarter.
What to expect?
When other FMCG biggies were struggling with low volume growth, Dabur India has been reporting robust growth in offtake. This has been an outcome of the rural bet played by the company two years ago when the distribution reach in villages was doubled. The company today derives more than 45% of its sales from rural India. With Dabur India sensing slowdown in rural India and revival in urban sales, the company has recalibrated its focus on the urban centric segments such as healthcare and beverages. In order to increase the distribution reach of its healthcare products in the chemist channel, the company has initiated Project Core. This is expected to unlock growth in the high-magin healthcare business. The company is also investing in its beverage business that is growing at a fast clip. Backed by pick-up in growth in its health care business, the company expects to tide over any slowdown in rural sales and maintain organic growth of 15% over the next three years.

We had given a BUY on the stock on 20th July 2012. The stock met our target price on 10th May 2013 after which we had given a SELL. At the current price of Rs 206, the stock is trading at 25 times its FY17 forecasted earnings. As all the upsides have already been factored in the stock price, we would recommend a SELL on the stock at current price levels.

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Jun 22, 2021 10:15 AM