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Dabur: Profitable growth continues - Views on News from Equitymaster

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Dabur: Profitable growth continues
Oct 26, 2012

Dabur India Limited has announced its second quarter results for financial year 2012-2013 (2QFY13). The company has reported a 21% YoY and 16% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Dabur posted a 21% increase in its top-line backed by robust growth in all business segments. During 1HFY13, revenues were up by 21%.
  • Operating margin contracted by 1.8% during the quarter due to a steep rise in ad-spends and other expenditure. For 1HFY13, operating margin reduced by 1.1% .
  • Aided by lower interest expense and jump in other income, earnings increased by a robust 16% in 2QFY13. During 1HFY13, earnings grew by 16.6%.

Consolidated picture
(Rs m) 2QFY12 2QFY13 % Change 1HFY12 1HFY13 % Change
Revenues 12,667 15,275 20.6% 24,770 29,992 21.1%
Expenditure 10,204 12,582 23.3% 20,490 25,140 22.7%
Operating profit (EBDITA) 2,462 2,693 9.4% 4,280 4,852 13.4%
EBDITA margin (%) 19.4% 17.6% -1.8% 17.3% 16.2% -1.1%
Other income 127 226 77.1% 286 468 63.4%
Interest 172 149 -13.5% 298 361 21.2%
Depreciation 252 270 7.1% 501 537 7.3%
Profit before tax 2,166 2,500 15.4% 3,767 4,421 17.4%
Tax 427 464 8.7% 750 842 12.3%
Minority Interest (0) 13   2 15  
Extraordinary Items - 1   - (46)  
Profit after tax/(loss) 1,739 2,024 16.4% 3,016 3,518 16.6%
Net profit margin (%) 13.7% 13.2%   12.2% 11.7%  
No. of shares (m)         1,743  
Diluted earnings per share (Rs)*         4.0  
Price to earnings ratio (x)*         32.7  
(*On a trailing 12-month basis)

What has driven performance in 2QFY13?
  • Dabur clocked a 21% increase in sales. All the business segments reported double-digit growth. The largest segment, consumer care grew by 18%. In consumer care, the shampoo category registered the sharpest growth of 40% followed by the skin care business that grew by 25%. The home care and health supplement businesses posted growths of 23% and 15.7%, respectively. The food segment comprising of the Real and Activ fruit juices grew by 19% during the quarter. Even the retail business witnessed a 49% surge for the quarter. Dabur's International Business recorded a growth of 24.8% during the quarter, led by robust performance in Gulf Cooperation Council, Egypt and Nigeria. Hair Care and Toothpastes were the key growth drivers in the overseas markets.

  • Dabur managed to tide raw material cost pressures through a mix of judicious price hikes and improved buying efficiencies. Consequently its raw material-to-sales ratio fell to 49% from 50% in the year-ago quarter. However, the input cost savings were entirely offset by a 42% surge in the ad-spends during the quarter. As a proportion of sales, ad-spends shot up to 11.8% from 10% in the year-ago quarter. Even other expenses saw a 30% jump exerting further pressure on margins. Consequently, the company's operating margin contracted by 1.8% to 17.6% during the quarter. While the EBIT margin of consumer care has improved by 40 basis points, the food business witnessed a 3.6% slide in EBIT margin in 2QFY13.

    All round picture
      % contribution to sales Revenue  growth PBIT growth PBIT margin  (%) PBIT margin  gain/(decline)
    basis points
    Consumer Care 83% 18% 21% 23% 41.4
    Foods 11.5% 19% 0% 19% -350.9
    Retail 1% 49% 9% -19%  
    Others 4.5% 82% 203% 12% 487.0

  • Aided by a 77% jump in other income earned and a 13.5% reduction in interest outgo, Dabur has been able to post a 16% rise in net profit for the quarter.

What to expect?
At the current price of Rs 130, the stock is trading at 17 times its FY15 forecasted earnings. With the company maintaining robust growth tempo both in the domestic and international markets, we would advise a HOLD on this stock. We would further update our subscribers' post the analyst meet with the management.

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