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Dabur: CCD business aids performance - Views on News from Equitymaster
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Dabur: CCD business aids performance
Oct 27, 2010

Dabur India Limited has announced its 2QFY11 results. The company has reported a 15.1% YoY and 15.4% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Consolidated net sales for 2QFY11 increased by a robust 15% YoY on the back of strong performance by the company’s consumer care division and foods business.
  • Operating (EBITDA) margins increased by 0.4% during 2QFY11. This comes on the back of lower advertisement costs and lower staff costs partially offset by higher raw material costs (all as a percentage of sales).
  • Net profit for 2QFY11 increased by 15.4% YoY. This increase is on the back of growth in operating profits and fall in interest costs. The net profit growth could have been higher but for an increase in effective tax rates.
  • Net profit for 1HFY11 increased by 16.9% YoY while net profit margin stood flat at 14%. This performance came on the back of higher operating income and lower interest. The net income growth was capped by lower other income and higher effective tax rate.
  • Dabur has declared an interim dividend of Rs 0.5 per share.

Consolidated picture
(Rs m) 2QFY10 2QFY11 % Change 1HFY10 1HFY11 % Change
Net sales 8,541 9,828 15.1% 16,272 19,080 17.3%
Expenditure 6,726 7,699 14.5% 13,249 15,497 17.0%
Operating profit (EBDITA) 1,816 2,129 17.3% 3,023 3,583 18.5%
EBDITA margin (%) 21.3% 21.7%   18.6% 18.8%  
Other income 73 67 -9.0% 137 139 1.8%
Interest 60 46 -23.6% 122 91 -26.0%
Depreciation 139 190 36.2% 269 334 24.4%
Profit before tax 1,690 1,960 16.0% 2,768 3,297 19.1%
Minority Interest 13 1   7 7  
Extraordinary Items - -   - -  
Tax 287 356 24.0% 476 619 29.9%
Profit after tax/(loss) 1,390 1,604 15.4% 2,285 2,671 16.9%
Net profit margin (%) 16.3% 16.3%   14.0% 14.0%  
No. of shares (m) 866 1,741   866 1,741  
Diluted earnings per share (Rs)*         3.1  
Price to earnings ratio (x)*         32.8  
On a trailing 12-months basis

What has driven performance in 2QFY11?
  • Sales improved by 15.1% YoY during the quarter. This growth was primarily driven by volumes as the company was reluctant to increase prices so as to improve market share. The growth was led by consumer care business and supported by the international business. Health supplements, home care, foods, oral care and digestives were the top performers.

    1HFY11 Division performance
    Segment Growth Key performers
    Hair oil 5.8% Dabar Amla Hair Oil (14.9%), Vatika Hair Oil (10.7%),
    Anmol Coconut Oil (7.3%)
    Shampoo -15.0%  
    Health Supplements 36.2% Dabur Chyawanprash (50.4%), Dabur Honey (15.8%),
    Dabur Glucose (48.6%)
    Skin care 11.0% Gulabari (15.5%), Fem Bleach (12.6%)
    Oral care 15.3% Dabur Red Toothpaste (20.8%), Babool (21.5%), Meswark (16.2%)
    Foods 21.3% Real Fruit Juice (22.3%), Activ Fruit Juice (22%),
    Hommade Paste (33.4%)
    Home care 37.4% Sanifresh (26.1%), Odomos (73.4%), Odonil (32.9%)
    Digestives and baby care 14.4% Hajmola Tablets (22.3%), Lal Tail (13.7%)
    Consumer Health Division 12.2% Pudin Hara (14.9%), Honitus (28.3%), Shilajit (28.7%),
    Dashmularishta (12.9%)

  • Sales of International Business Division (IBD) grew by 23.3% YoY during the quarter with GCC, Egypt, North Africa, Nigeria and Levant region the top performers. Sales from GCC and Egypt grew by 23% YoY and 45% YoY respectively. North Africa grew by 55% YoY while Nigeria and Levant grew by 47% YoY and 35% YoY respectively.

    Cost break-up
    As a % of sales 2QFY10 2QFY11 1HFY10 1HFY11
    Total raw material costs 44.7% 46.6% 45.7% 46.8%
    Advertising costs 14.1% 12.4% 14.9% 14.3%
    Staff costs 8.5% 7.9% 8.4% 7.9%
    Other expenditure 11.5% 11.4% 12.4% 12.3%

  • Operating (EBITDA) profit for the quarter increased by 17.3% YoY. Operating profit improved as a result of fall in advertisement spending and staff costs (as a percentage of sales). However, higher raw material costs (as a percentage of sales) capped operating profit growth.

  • Net profit for the quarter increased by 15.4% YoY. This is because of higher operating income and lower interest costs. The growth could have been higher but for increase in depreciation costs and higher effective tax rates as a result of some of the company’s manufacturing facilities exhausting their tax exempt period. Effective tax rate increased from 17.0% in 2QFY10 to 18.2% in 2QFY11.

    Consolidated EBIT margin
    2QFY10 2QFY11 1HFY10 1HFY11
    Consumer Care Business 28.9% 28.4% 26.6% 14.2%
    Consumer Health Business 26.7% 20.7% 26.4% 12.2%
    Foods Business 22.1% 21.9% 17.5% 12.1%
    Retail Business -84.6% -54.8% -118.9% -53.1%
    Others 11.6% 9.8% 7.4% 2.3%

What to expect?
At a price of Rs. 103, the stock is trading at 24.1 times our estimated FY13 earnings (RPro subscribers click here. The company has performed well on the back of its CCD and international business with health supplements, home care, foods, oral care and digestives divisions seeing good traction. However, at these levels, we feel that growth from a 2-3 year perspective is priced in the stock. We therefore advise our subscribers to be cautious while investing in this counter.

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