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Dabur: Sluggish numbers

Nov 28, 2001

Dabur India declared its first half FY02 results yesterday. The company reported a small 3% growth in turnover and a 13% growth in bottomline during this period. Comparing 2QFY02 with the corresponding quarter last year, Dabur managed a 5% growth in turnover and a 10% growth in net profits.

(Rs m)2QFY012QFY02Change1HFY011HFY02Change
Net Sales2,9903,1344.8%5,4695,6232.8%
Other Income5245-12.5%6661-6.7%
Expenditure2,6392,7785.3%4,9415,0822.9%
Operating Profit (EBDIT)3513561.3%5285412.3%
Operating Profit Margin (%)11.7%11.3%9.7%9.6%
Interest 10467-35.6%161120-25.6%
Depreciation5550-7.7%108103-3.9%
Profit before Tax24528416.0%32537916.4%
Extraordinary items-60-60
Tax1739137.0%274674.0%
Profit after Tax/(Loss)22224510.1%29433313.3%
Net profit margin (%)7.4%7.8%5.4%5.9%
No. of Shares 28.5 285.228.5285.2
Diluted Earnings per share*3.13.42.12.3
P/E Ratio20.730.4
*(annualised)

The company has stated that the net sales during the six-month period ended September 30, 2001 is not entirely comparable with that of the corresponding period of the previous year. The growth in sales, on like to like basis (excluding some of the businesses such as herbal intermediaries, which have been discontinued) for the period has been 5.9%. The sales growth has been much better in 2QFY02 compared to a miniscule 0.4% sales growth in 1QFY02.

Despite this the company's sluggish topline growth continues to be a concern. Dabur has meanwhile, concentrated on pruning its debt burden as well as restructuring its business operations. The company's interest burden in 1HFY02 has declined 26% YoY and its depreciation provisioning too has declined marginally by 4%. However, the company has not been able prune its operating expenses, which have grown a shade faster than net sales. This has put pressure on operating margins.

In the first quarter of FY02 (June quarter), Dabur had clarified that its FMCG business (which accounts for approximately 70% of the total) grew by 5.6% during that quarter. It was a slowdown in its ethical business that really affected the overall topline growth. By ethical we mean over the counter (OTC) products like Hajmola and Pudin Hara. This may still be the case in this September quarter.

Dabur's net profit growth in the first half would have been far more encouraging had it not been for increased taxes due to the AS-22 provisions. If we exclude the Rs 17 m deferred tax provision, Dabur's YoY net profit growth stands at over 19%. The Dabur management has decided to pay an interim dividend of Re 0.50 per equity share of Rs 1/- each for FY02 aggregating to Rs 143 m.

At the current price of Rs 71 the stock trades at 30x its 1HFY02 annualised earnings, which seems on the higher side. With competition from Zandu, Baidyanath and Himalaya Drugs increasing, Dabur's monopoly in ayurvedic products is under pressure. With HLL considering entering this segment Dabur has to gear up its act.

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