Dabur India, the ayurvedic products major, has reported a marginal 2% topline growth during the September quarter 2002. The company had reported a 7% topline growth during the June quarter. Cost efficiencies led to a 160 basis point expansion in operating margins, thus helping the company report nearly 24% growth in 2QFY03 net profit.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax
Net profit margin (%)
Effective tax rate (%)
No. of Shares (eoy) (m)
Diluted earnings per share
The company's raw material costs, both in September quarter and 1HFY03, declined YoY, but cost of goods purchased saw an increase. This reflects the increasing trend of outsourcing adopted by the company. A lot of FMCG companies outsource production finding them more cost efficient as compared to own plant manufacture. Though Dabur's depreciation provisioning remained more or less steady at last year's levels, its interest cost during 2QFY03 saw a major decline (down 55% YoY). This restructuring of debt also led to higher bottomline growth.
Costs as a % of sales
Raw material cost
Finished goods purchased
Dabur has restructured its pharmaceutical business with effect from July 01, 2002. With this one hopes that the management will be able to focus more on growing its FMCG folio. The dwindling topline growth continues to be a concern, though to be fair to the company, Dabur's growth is quite in line with the FMCG industry's current plight.
The stock trades at Rs 45, a P/E of 15.4x annualised 1HFY03 earnings. The company's performance has been encouraging so far in FY03 and we see no reason why this should not continue for the rest of the fiscal year. But despite this, we are skeptical of the stock owing to the promoter's diversified focus.
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