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Dabur: Raw material fall increases margins - Views on News from Equitymaster
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Dabur: Raw material fall increases margins
Oct 26, 2009

Performance summary
  • Consolidated net sales for 2QFY10 increased by a robust 22% YoY on the back of strong consumer spending coupled with new products rollout.
  • Operating (EBITDA) margins improved by 2.2% to 21.2% for 2QFY10. This increase comes on the back of fall in raw material costs, offset to some extent by increase in advertisement costs as a percentage of sales.
  • Net profit margins for 2QFY10 increased by 0.9% to 16.3%. This increase is on the back of higher sales and operating profits offset by increase in tax expenses.
  • Net profit margin for 1HFY10 increased by 0.8% to 14.3% due to increase in sales and other income.


(Rs m) 2QFY09 2QFY10 % Change 1HFY09 1HFY10 % Change
Net sales 6,993 8,540 22.1% 13104.5 16013 22.2%
Expenditure 5,664 6,726 18.8% 10832.1 12970 19.7%
Operating profit (EBDITA) 1,329 1,814 36.4% 2,272 3,043 33.9%
EBDITA margin (%) 19.0% 21.2%   17.3% 19.0%  
Other income 63.6 47.8 -24.8% 111.5 79.4 -28.8%
Interest 39.5 32.9 -16.7% 79.8 69.7 -12.7%
Depreciation 123.3 139.2 12.9% 239.9 262.7 9.5%
Profit before tax 1,230 1,690 37.3% 2,064 2,790 35.2%
Minority Interest 4 -11   3 -7  
Extraordinary Items 0 0   0 0  
Tax 156.1 287.1 83.9% 282.9 477.4 68.8%
Profit after tax/(loss) 1,074 1,402 30.6% 1,781 2,313 29.8%
Net profit margin (%) 15.4% 16.4%   13.6% 14.4%  
No. of shares (m) 866 866   866 866  
Diluted earnings per share (Rs)*         5.1  
Price to earnings ratio (x)*         30.5  
* On a trailing 12-months basis

What has driven growth in 1QFY10?
    Consolidated EBIT margins
      2QFY09 2QFY10 1HFY09 1HFY10
    Consumer Care Business 26.4% 28.7% 25.4% 26.7%
    Consumer Health Business 31.0% 26.7% 28.3% 26.4%
    Foods Business 16.8% 22.1% 15.3% 17.5%
    Retail Business na na na na
    Others 1.8% 11.1% 3.1% 8.7%

  • Sales for the company increased on the back of strong volume growth across key categories.

  • The company rolled out several new products during the quarter like Dabur Uveda range of Ayurvedic skin care products, Babool Mint Fresh Gel and Fem Herbal Bleach, Dabur Amla Flower Magic Hair Oil, Vatika enriched Almond Hair Oil and Dabur Total Protect Ayurvedic health shampoo which helped grow sales.

  • The company’s overseas business performed strongly with a sales growth for 2QFY10 recorded at 27.5% YoY. Of the overseas markets, Nepal was the strongest performer with sales growth of 41.4% YoY. 36.8% YoY growth in sales was recorded in GCC while sales in Egypt grew by 35.3% YoY.

    Segment Growth Key performers
    Hair oil 15.0% Dabur Amla (12.5%), Anmol Coconut (38.8%), Vatika (15.8%)
    Shampoo 45.5%  
    Health Supplements 23.5% Dabur Honey (15%), Chwyanprash (12.5%)
    Baby and Skin care 42.7% Gulabari (47%)
    Oral care 11.0% Babool (9%), Red Toothpaste (16%)
    Foods 24.0% Real Fruit juice incl. Activ (26%), Culinary range (13%),
    Digestives 13.0% Hajmola (11.5%)
    Consumer Health Division 17.7% Pudin Hara (30%)
    Fem Care 24.2%  

  • Net profit for the quarter grew by 29% YoY due to higher tax expense which grew by 84%. This is due to some of the company’s manufacturing hubs coming out of the tax exemption period.

What to expect?
At a price of Rs.156, the stock is trading at 25 times our estimated FY12 earnings. Dabur has performed strongly with good top line growth and margin expansion due to falling raw material prices. However, we do not expect this performance to continue in the long run as we expect the raw material prices to start moving up again. Moreover, we believe the present growth rate in the company’s international business to be unsustainable. We would ask investors to practice caution at this juncture

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Feb 23, 2018 10:23 AM

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