DABUR INDIA LIMITED RESEARCH EQUITY RESEARCH August 10, 2009 RESULTS REVIEW Dabur India Limited Share Data Dismal monsoon to play spoilsport in near-term
For Q1’10, Dabur India Ltd (Dabur) posted a healthy top-line growth of 23%
yoy to Rs. 7.4 bn led by robust 16% yoy growth in volumes across its key
categories. EBITDA grew by 30.3% yoy to Rs. 1.3 bn and margins by 93 bps
to 16.5% due to softening of raw material prices. We believe Dabur will
witness robust revenue growth in medium-to-long term on the back of
increasing traction in its portfolio mix and entry into new geographies.
However, owing to the weak near-term outlook due to dismal monsoon, and
Valuation Ratios (Consolidated)
recent run-up in the stock prices, we maintain our hold rating on the stock.
Year to 31 March Healthy double-digit volume growth to continue: The Government’s
stimulus to rural employment, through increased fund allocation to various
rural development schemes, would augment the rural demand. We believe
Dabur would be a large beneficiary of this as it garners around 50% of the
Shareholding Pattern (%)
revenue from rural India through its wide distribution network. Furthermore,
we expect Dabur to gain more traction in its international markets as well as
in the new geographies as its products have received astonishing response
in these markets. Post the Fem Care acquisition, Dabur is also looking for
Relative Performance
overseas acquisition opportunities to add more established brands to its
portfolio to accelerate its revenue growth. However, we expect weak
monsoon will restrict the domestic growth in the near-term. Factoring all the
above, we expect the revenue to grow at a CAGR of 19.3% for FY09–11E.
Margins to contract in near term: We have cut our EBITDA margin
estimates for the second half of FY10 by ~150 bps due to increase in input
cost following weak monsoon and increase in ad spendings primarily related
Rebased BSE Index
to Fem Care branding. However, we maintain margins for FY11 at 18%.
Key Figures (Consolidated) Quarterly Data
(Figures in Rs. mn, except per share data) Net Sales
Margins(%) Per Share Data (Rs.) Please see the end of the report for disclaimer and disclosures. -1- DABUR INDIA LIMITED RESEARCH EQUITY RESEARCH August 10, 2009 Valuation
We have raised our target price from Rs. 116 to Rs. 141, due to strong
revenue visibility in medium-to-long term from the rural India and
international markets. Besides, the Company has cash balance of around
1.4 bn and has a healthy debt to equity ratio of 0.28x, which will help it to
meet its future plan to grow inorganically.
At the CMP the stock trades at a forward P/E of 25x and 21x for FY10E and
FY11E. Based on our DCF valuation (assuming a WACC of 12.2%, Rf of
7.88%, and terminal growth of 5%) we arrived at a target price of
Rs. 141, which provides an upside of 8% over the CMP of Rs. 130.45.
Hence, we maintain a neutral view on the stock.
Cost of Capital Result Highlights
Dabur reported an outstanding revenue growth of 23% yoy to Rs. 7.4 bn, in
Q1’10, on the back of robust volume growth and better pricing of 16% and
3.5%, respectively. Balance 2.7% growth came from translation gains in
international business. Moreover, the Company, after completing take-over
formalities of Fem care on June 25th, consolidated the latter’s results for six
days of the quarter, which contributed 0.6% yoy to the total growth.
EBITDA margin improved 93 bps yoy to 16.5% because of decline in raw
material cost and savings in fixed and variable overheads, partially
mitigating the adverse impact of the increase in the advertisement and
publicity expenditure. Adjusted net profit grew 29% yoy to Rs. 913.91 mn
Please see the end of the report for disclaimer and disclosures. -2- DABUR INDIA LIMITED RESEARCH EQUITY RESEARCH August 10, 2009 Segmental Highlights and Outlook Consumer Care Division (CCD) grew by 20.2% yoy to Rs. 5.64 bn and
remained the key revenue driver contributing 75% to the total revenue. Like
previous quarter, Hair Care, Shampoo, and Baby & Skin care led the
growth. Hair care leapt 22.5% yoy on the back of 15.8% growth in the Hair
Oil category especially, Anmol Coconut oil and Vatika Hair oil which grew
42.7% and 15.5%, respectively. Shampoo category performed well led by
48.6% yoy growth in Vatika shampoos. Sequentially, Dabur brands have
gained further market share in the normal shampoo category from 6.8% in
Q4’09 to 7.3% in Q1’10. In Baby Skin Care, Gulabari grew 47.2%, whereas
Dabur Lal Tail has been re-launched with new proposition. Food Division’s
revenue grew by 21.6% in Q1’10 as compared with 15.4% growth in Q1’09
owing to 17.7% growth in Real franchise expanding the sales channels for
EBITDA Margin
We expect CCD division to grow by 20% yoy for FY10 driven by strong
traction in key categories like hair-care, oral care, and juices aided by
launches of new products and variants. Also nearly 4% yoy growth is
expected from Fem Care Pharma from next quarter.
Consumer Health Division (CHD) grew by 12.5% yoy, driven by the
popular brands - Pudin Hara, Churnas, and Asavs. The OTC portfolio grew
by 15% yoy and the ethical portfolio by a mere 8%. The transfer of some
products (Pudin hara, Janam Ghunti, Hingoli, Sat Isabgol and Gripe Water)
to its CHD division from CCD has shown positive outcomes, resulting in
better volume growth. We do not expect this division to significantly
contribute to overall growth in the absence of any new launches.
International Business grew by a whooping 52.9% yoy during the quarter
on the back of robust performances in key geographies like GCC, Egypt,
Dabur is expanding aggressively
Levant, and North African markets. Part of it is on account of translational
into newer geographies
gains, excluding that the growth was 35%. New products (Dermoviva soap
and Amla Hair Cream) launched in the previous quarters have contributed
Please see the end of the report for disclaimer and disclosures. -3- DABUR INDIA LIMITED RESEARCH EQUITY RESEARCH August 10, 2009
We expect Dabur brands to continue to gain traction in its overseas markets
as a lot of opportunities are still there in terms of volume and pricing.
Moreover, with inclusion of Uzbekistan, Guinea, and Belarus in the current
quarter, the Company is expanding its presence into new geographies
which would accelerate revenue growth in international business.
Key Risks
The worse-than-expected impact of monsoons on the rural demand is a key
Key Figures (Consolidated) Year to March
(Figures in Rs. mn, except per share data)
Margins(%) Per Share Data (Rs.) Please see the end of the report for disclaimer and disclosures. -4- DABUR INDIA LIMITED RESEARCH EQUITY RESEARCH August 10, 2009
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