X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Dabur: Repositioning bears fruit - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Dabur: Repositioning bears fruit
Oct 25, 2007

Performance summary
  • Strong growth across its key categories leads to the consolidated topline growth of 12.9% YoY for 2QFY08.
  • Consolidated operating margins improve by 1% YoY led by decline in expenses (as a % of sales).

  • Excluding the extraordinary the net profit grows by 29.5% YoY on a consolidated basis.

  • The board has recommended a dividend of Re 0.75 per share (divided yield of 0.7%)

    Consolidated performance
    Rs(m) 2QFY07 2QFY08 (%) Change 1HFY07 1HFY08 (%) Change
    Net sales 5,544 6,258 12.9% 10,231 11,871 16.0%
    Expenditure 4,571 5,098 11.5% 8,618 9,919 15.1%
    Operating profit (EBDITA) 973 1,159 19.1% 1,613 1,952 21.0%
    EBDITA margin (%) 17.6% 18.5%   15.8% 16.4% 1.50
    Other income 62 76 23.9% 114 153 34.0%
    Interest 55 42 -22.5% 96 89 -6.8%
    Depreciation 106 98 -7.8% 203 199 -1.8%
    Profit before tax 874 1,096 25.3% 1,429 1,817 27.2%
    Extraordinary item 41 -   41 -  
    Minority interest -5.6 8.2 - 2.9 9.6 231.0%
    Tax 123 138.7 12.4% 204 239 17.3%
    Profit after tax/(loss) 787 965 22.7% 1,269 1,587 25.1%
    Net profit margin (%) 14.2% 15.4%   12.4% 13.4%  
    No. of shares (m) 864.0 864.0   864.0 864.0  
    Diluted earnings per share (Rs)*         3.6  
    Price to earnings ratio (x)*         29.9  
    * 12 month trailing earnings

    What is the company’s business?
    Dabur is India’s fourth largest FMCG company with interests in health care, personal care and food products. The company’s name is generic to ‘ayurvedic’ products in India, and it has big brands like Vatika (hair oils), Chyawanprash, Hajmola, Amla oil and Lal Dant Manjan (oral care) under its stable. In FY04, Dabur approved the demerger of its FMCG and pharma businesses, into two separate listed entities. The move was aimed at bringing in more focus to both businesses, as well as to unlock value for shareholders. Further, the company acquired Balsara’s business in FY05 for a consideration of Rs 1.4 bn.

    What has driven performance in 2QFY08?
    Standalone view: The standalone entity witnessed an 11% YoY growth for 2QFY07. Its contribution to the total revenues fell from 77% in 2QFY07 to 76% in the current quarter. The company is revamping current of it products. Also, with launches of new products and priority given to foods division we are positive on the topline performance.

    Standalone
    Rs(m) 2QFY07 2QFY08 (%) Change 1HFY07 1HFY08 (%) Change
    Net sales 4,272 4,751 11.2% 8,081 9,109 12.7%
    Expenditure 3,470 3,747 8.0% 6,714 7,449 10.9%
    Operating profit (EBDITA) 801 1,004 25.3% 1,367 1,660 21.4%
    EBDITA margin (%) 18.8% 21.1%   16.9% 18.2%  
    Other income 36 55 53.6% 90 112 25.5%
    Interest 10 10 -1.0% 26 24 -7.4%
    Depreciation 73 66 -9.7% 141 137 -3.3%
    Profit before tax 754 983 30.4% 1,290 1,612 25.0%
    Tax 107 125 16.6% 185 213.5 15.7%
    Extraordinary item 41 0   41 0  
    Profit after tax/(loss) 688 858 24.7% 1,147 1,399 22.0%
    Net profit margin (%) 16.1% 18.1%   14.2% 15.4%  

    Consumer care leads the way: On a consolidated basis, the topline grew by 13% YoY for 2QFY07. Key categories continued with their sales performance. For 1HFY08, the topline grew by 16% YoY. While Consumer care, foods and International business division reported a growth of 15% YoY, 25% YoY and 31% YoY respectively for 1HFY08, consumer health care division sales growth fell by 3.8%.

    Strong growth across all its segments led to the double-digit growth in the CCD division. Oral care, shampoo and health supplements were the main growth drivers. Dabur’s share in toothpaste category increased by 1.9% from FY07 to touch 12.3% in 1HFY08 (volume share as per A C Nielsen). The company repositioned and introduced new products in the quarter.

    Division performance
    Segment Growth Key performers
    Hair oil 7% Dabur Amla (10.8%), Anmol Coconut (14%) Anmol Mustard (22%)
    Shampoo 16.8% Vatika
    Health Supplements 17% Chyawanprash (5% YoY), Glucose (46% YoY) and Dabur Honey (19% YoY)
    Baby and Skin care 9.4% Dabur Lal Tail (15%) , Gulabari (16%)
    Digestives 15% PudinHara (15 %), HajmolaCandies( 34%), Hajmola tablets (11%)
    Oral care 35% Red toothpaste (28%), Babool (44.1%), Meswak (29.3%)
    Home care 14% Odonil(17%), sanifresh (13%)

    The consumer healthcare division reported a 3.8% decline as it is undergoing a consolidation phase and key initiatives are planned for next 2 quarters. The foods division grew by 25% YoY for 1HFY08. Real Fruit juices recorded growth of 32% YoY, while Hommade range did well with Culinary Pastes growing by 37% YoY and Tomato puree by 27% YoY. New launches in juices were made in the quarter. International business division recorded a growth of 31% YoY with GCC and African markets driving the sales. Sales in GCC region increased by 42.3% YoY, while Dabur Egypt grew by 47% YoY. Pakistan and Nigeria grew by 28% YoY and 160% YoY respectively.

    Consolidated cost break-up
    As a % of net sales 2QFY07 2QFY08 1HFY07 1HFY08
    Total Cost of goods 44.2% 44.0% 43.0% 43.7%
    Staff Cost 8.0% 7.8% 8.2% 7.9%
    Advertising 9.5% 9.8% 11.5% 11.4%
    Other Expenditure 20.8% 19.9% 21.6% 20.5%

    Margin improvement: On a consolidated basis, the margins improved by 1% YoY led by effective cost management by the company. While all expenses witnessed a reduction (as a % of sales), advertisement expenses were higher by 30 basis points. On the segmental basis, the consumer care, consumer health and foods division reported stable PBIT margins. On a standalone basis, the margins improved by 2.4% for 2QFY08.

    PBIT 2QFY07 2QFY08 1HFY07 1HFY08
             
    Consumer care 1,114 1,225 1,960 2,258
    % of total PBIT 83.7% 81.2% 85.3% 83.3%
    Consumer health 116 105 199 193
    % of total PBIT 8.7% 7.0% 8.7% 7.1%
    Foods 99 114 136 185
    % of total PBIT 7.5% 7.5% 5.9% 6.8%
    Others 3 65 2 74
    % of total PBIT 0.2% 4.3% 0.1% 2.7%
             
    Total 1,332 1,508 2,297 2,710

    Faster growth in bottomline: The bottomline witnessed a 29.5% YoY growth on a consolidated basis for 2QFY08 after excluding the extraordinary item. Lower interest and depreciation costs aided the performance. Further the tax rates also reduced from 14% in 2QFY07 to 12.7% in this quarter. The standalone profits grew by 32.6% YoY after excluding the extraordinary item.

    What to expect?
    At the current price of Rs 109, the stock is trading at a price to earnings multiple of 19.5 times our FY10 estimates. Dabur has decided to merge the foods division with itself as it expects faster growth from this division. The company is also launching new products. Though consumer health division performance is not upto the mark, the company is consolidating the division and expects better future going forward.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

DABUR SHARE PRICE


Feb 19, 2018 (Close)

TRACK DABUR

DABUR - ADVANTA LTD. COMPARISON

COMPARE DABUR WITH

MARKET STATS