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Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Edelweiss Securities Limited
Dabur’s Q4FY13 numbers were exactly in line with our estimates. Key
positives were (1) 12% YoY domestic volume growth on a base of 9.5%
(highest in the past 11 quarters), (2) second consecutive quarter of
EBITDA margin expansion; (3) strong growth of ~30% YoY each in
shampoos and home care; (4) healthy growth in foods (22.6% YoY); and
(5) pick up in CSD demand (largely due to base effect). Key negatives
were: (1) sustained pressure in digestives (grew at 1.3% YoY; was down
5.4% YoY in Q3FY13); and (2) continued slowdown in Namaste business
(corrective steps taken and may revive in FY14E). Fruit juice
manufacturing facility in Sri Lanka will begin commercial production from
May 03, 2013. We believe Dabur is in a sweet spot with volume growth
ahead of most peers and its aggressive distribution drive (as highlighted
in our previous notes). Maintain ‘BUY’.
This report also contains Q4FY13 conference call highlights.
EBITDA margin expands after six quarters
Domestic business saw a robust growth of 15.1% YoY led by 12.3% YoY strong volume
growth. At the consolidated level, gross margin expanded 199bps YoY, leading to 77bps
YoY EBITDA margin expansion despite higher staff costs (up 86bps YoY) and other
expenses (up 120bps YoY); ad spends declined 84bps YoY to 12.4% of sales. Core PAT
grew 18.4% YoY as finance cost surged 162% YoY. Rural growth continued to be ahead
of rural aided by ‘Project Double’; modern trade grew at 28% YoY.
Healthy growth in foods, home care and shampoos
Hair care grew 9.6% YoY, home care surged 33.3% YoY, oral care continued its slow
growth at 12.3% YoY, health supplements surged 22.6% YoY, skin care grew 11.1% YoY
and OTC & ethicals grew 13.7% YoY. International business grew 19.7% YoY organically
(10-11% volume led).
Outlook and valuations: Positive; maintain ‘BUY’
At CMP it is trading at P/E of 28.4x and 23.6x for FY14E and FY15E, respectively. We like
Dabur’s aggression in product innovation, investments in existing product range and in
distribution expansion. Hence, we maintain ‘BUY’ and rate it ‘SO’ with TP of INR176.
RESULT UPDATE
DABUR Domestic volumes, margins surge
EDELWEISS 4D RATINGS
Absolute Rating BUY
Rating Relative to Sector Outperformer
Risk Rating Relative to Sector Medium
Sector Relative to Market Overweight
MARKET DATA (R: DABU.BO, B: DABUR IN)
CMP : INR 148
Target Price : INR 176
52-week range (INR) : 156 / 101
Share in issue (mn) : 1,742.9
M cap (INR bn/USD mn) : 258 / 4,785
Avg. Daily Vol.BSE/NSE(‘000) : 1,230.1
SHARE HOLDING PATTERN (%)
Current Q3FY13 Q2FY13
Promoters *
68.7 68.7 68.7
MF's, FI's & BK’s 4.3 5.1 5.4
FII's 20.2 19.6 19.2
Others 6.8 6.6 6.7
* Promoters pledged shares
(% of share in issue)
: 0.1
PRICE PERFORMANCE (%)
Stock Nifty
EW Consumer
Goods Index
1 month 7.9 4.4 2.4
3 months 11.4 (1.7) 5.1
12 months 32.1 13.0 26.2
Abneesh Roy
+91 22 6620 3141
abneesh.roy@edelweissfin.com
Hemang Gandhi
+91 22 6620 3148
hemang.gandhi@edelweissfin.com
Pooja Lath
+91 22 6620 3075
pooja.lath@edelweissfin.com
India Equity Research| Consumer Goods
April 30, 2013
Financials (INR mn)
Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13E FY14E FY15E
Net sales 15,311 13,636 12.3 16,307 (6.1) 61,464 71,462 84,096
EBITDA 2,729 2,320 17.6 2,745 (0.6) 10,298 12,254 14,596
Net profit 2,006 1,705 17.6 2,111 (5.0) 7,634 9,127 10,976
Dil. EPS (INR) 1.2 1.0 18.3 1.2 (4.0) 4.4 5.2 6.3
Diluted P/E (x) 33.6 28.4 23.6
EV/EBITDA (x) 24.9 20.5 16.8
ROAE (%) 39.7 37.3 36.0
Consumer Goods
2 Edelweiss Securities Limited
Table 1: Segment-wise snapshot
Source: Company, Edelweiss research
Q4FY13 Conference call | Key Takeaways
• Volume growth: Dabur posted 12.3% YoY volume growth in domestic business in
Q3FY13 (highest in past 11 quarters; 9.5%, 9.0%, 11.6% and 9.5% YoY for Q3FY13,
Q2FY13, Q1FY13 and Q4FY12, respectively) on a high base of 9% YoY growth in Q4FY12.
The company has guided for a volume growth of 8-12% and likely price hike of 2-3% for
FY14.
• Rural growth: Roll out of ‘Project Double’ (in the ten states of Uttar Pradesh,
Maharashtra, Madhya Pradesh, Bihar, West Bengal, Assam, Karnataka, Rajasthan,
Orissa and Punjab) helped increase direct coverage 14,865 villages in March 2011 to
Segment
Growth
Y-o-Y(%)
Domestic business
Hair Care � Hair oil posted 7% YoY growth and has maintained market share
� Perfumed hair oils grew 13% YoY driven by double digit volume growth; Dabur Amla Hair Oil saw
good performance� Coconut based oil faced pressure because of high price differential from competing products after the
decline of coconut prices� Shampoos grew at strong 29.4% YoY after the rebranding of the brand as Vatika Premium Naturals
Health supplement 22.6 � Dabur Honey saw a strong growth on the back of strong promotions support
� Differentiated proposition of Cooling Energy and focus on flavours working well for glucose
Food 22.6 � Real and Real Activ reported strong growth; new variants and demand driving growth in the category� Ethnic flavour – Kokam launched under Real Burrst in select states� Activ coconut water has been test launched in select markets� Culinary portfolio was steady in Q4FY13
Oral Care 12.3 � Toothpaste grew by 15.8% YoY with Dabur Red Toothpaste and Meswak performing well; premium
offering saw market share increase� The discount brand (Babool) was flattish; launched Super Babool + Salt Powder Toothpaste � Toothpowder grew 3% YoY
Digestive 1.3 � Small growth is largely due to the large base of 19.4% in Q4FY12� New variant, Hajmola Anardana was launched during the quarter� Pudin Hara reported double digit growth during the quarter
Skin Care 11.1 � Fem portfolio grew 11.6% YoY with Fem bleaches crossing the INR1bn mark in FY13� Fem Liquid Handwash re-launched on natural skin care platform� Dabur Gulabari witnessed good growth due to new variants and promotions
Home Care 33.3 � Odonil witnessed a robust growth � Odonil Gel (air freshener) has been nationally rolled out (initially launched in South)� Odomos reported good growth and gained market share
� Sanifresh has gained market share and has now become the second biggest brand in the Toilet
cleaners category
OTC & Ethicals 13.7 � OTC portfolio grew by 16.7% YoY; Lal Tail saw strong double digit growth
� Ethicals portfolio grew by 9% YoY
11.6 � Organic business grew 19.7% YoY with 12.9% constant currency growth; 10-11% YoY organic volume
growth� In FY13 GCC grew 20% YoY, Levant grew 30% YoY, Bangladesh grew 57% YoY and Egypt grew 15% YoY� Hobi business performed well; brand introduced in Turkey to leverage Hobi’s
distribution network � Namaste business performance under pressure in FY13; rebranding completed with Organic Root
Stimulator rebranded as ‘ORS’� Distribution networks streamlined in African markets along with addition of resources
Key takeaways Q4FY13
9.6
International
division
Dabur
3 Edelweiss Securities Limited
30,091 villages; retail outlets reach has increased from 5.3mn in FY11 to 5.8mn in FY13;
however, the main benefit of the project has been the quality of distribution with
smaller brands seeing good growth.
• Modern trade: Modern trade grew 28% YoY and contributed 9% to total sales.
• Domestic performance: Domestic business contributed 70% to overall sales, up 15.1%
YoY, led by 12.3% YoY volume growth. CCB and foods contributed 81% and 16%,
respectively, to domestic revenue. Others consisting of commodity exports registered
some decline due to softening of international prices; collapse in prices of guar led to
sales dip to half of that last year.
• Health supplements: Health supplements grew at a robust growth rate of 22.6% YoY
led by strong growth in Dabur Honey (supported by ad spends) and Glucose
(differentiated proposition of Cooling Energy and focus on flavours working well).
• Digestives: This business grew 1.3% YoY due to high base (19.4% YoY growth in
Q4FY13). Pudin Hara reported strong double digit growth during the quarter. A new
variant ‘Hajmola Anardana’ was launched during Q4FY13.
• OTC and ethicals: This business grew 13.7% YoY. OTC portfolio posted 16.7% YoY
growth with Lal Tail posting strong double digit growth. Ethicals grew 9% YoY. Dabur
entered the digital space with the launch of two portals - www.daburmediclub.com
aimed at medical professionals and www.liveveda.com to enable better connects with
consumers.
• Hair oils: This segment posted 7% YoY growth and maintained market shares. Perfumed
hair oil category grew 13% with double digit volume growth and 14% YoY growth in
Dabur Amla Hair Oil. Vatika (coconut oil) sales continued to be under pressure due to
high price differential to competitors’ consequent to decline in raw material costs.
• Shampoos: Shampoos continued on revival track, clocking growth of 29.4% YoY led by
Vatika Premium Naturals range.
• Home care: Home care surged 33% YoY with Odomos gaining market share. Odonil
posted strong growth despite being a discretionary product; Odonil Gel which was
introduced in a few Southern markets in Q3FY13 has been launched pan India.
Sanifresh has become the second biggest brand in toilet cleaners category on the back
of strong growth and gains in market shares.
• Skin care: Skin care grew 11.1% YoY. Dabur Gulabari (largely winter product) posted
good growth driven by new variants and focused activations and promotions. Fem
portfolio grew by 11.6% YoY; Fem Liquid Handwash was re-launched on natural skin
care platform. Fem Bleaches crossed INR1bn sales mark in FY13. Turmeric Herbal bleach
was launched during the quarter.
• Oral care: Oral care grew 12.3% YoY. Premium products Dabur Red Toothpaste and
Meswak performed well and posted market share gains, with overall toothpaste
portfolio growing at 15.8% YoY led by volume growth. However, Babool growth was
flattish YoY. In line with the company’s strategy of improving profitability from this
product it launched the value added variant ‘Super Babool + Salt Power Toothpaste’.
Toothpowder grew at a mere 3% YoY.
Consumer Goods
4 Edelweiss Securities Limited
• Foods: Foods business posted good growth of 22.6% YoY with both Real and Activ
reporting healthy growth. The company introduced ethnic flavor Kokam under Real
Burrst in select states. Culinary portfolio growth was flattish YoY. Higher growth in
foods as compared to the consumer products business has put some pressure on
margins as foods EBIT margin (at 11-13%) is lower than that of CBP (at 22%).
• International business: International business (IB) grew 11.6% YoY. Ex-Namaste, the
organic business grew 19.7% YoY. Organic volume growth stood at 10-11% YoY.
Namaste business remained under pressure (declined 10% YoY) due to distribution
restructuring in Africa along with addition of resources. Re-branding exercise in the US
is complete with Organic Root Stimulator rebranded as ‘ORS’. Growth is expected to
revive from the next quarter. South Africa is back on track.
Hobi business performed well with 42% YoY growth led by investment in brands and
geographical expansion.
Fruit juice manufacturing facility in Sri Lanka will commence commercial production
from 3rd
May 2013.
• A&P: In line with its earlier guidance of 50-100bps reduction in ad spends Q4FY13 saw
84bps YoY decline in the same. Dabur is looking at its ad spends to stabilize at 13% of
sales.
• CSD: CSD business has seen uptick in demand though not normalized, it is seeing
benefit of base impact (base to be favorable till Q3FY14). CSD contribution to sales
which was earlier at 5-6% dropped to 4.7% in FY13 and is likely to come back to earlier
levels in FY14. Pep up CSD volumes has a bearing on margins.
• Tax rate: Tax rate is likely to be ~20% for FY14E. The company will follow MAT for the
next 4-5 years.
Other key developments
• Himalaya’s re-entry in toothpaste segment - Himalaya had toothpaste Dental Cream
(launched 15 years ago) in the oral care space, which it is planning to phase out. It has
instead launched four new toothpastes (1) Complete Care – regular segment, (2)
Sparkling White – whitening segment, (3) Active Fresh Gel – freshness segment and (4)
Sensitive – sensitivity segment. The new products are targeted at urban consumers and
will be rolled out pan-India later. We believe Himalaya’s ayurvedic offerings can be a
potential threat to Dabur’s oral care business.
• Actor Irffan Khan has been roped in as the brand face of Dabur Super Babool + Salt
Powder.
• Dabur has not entered the fast growing sensitive toothpaste category. Competitors
have been very aggressive and have been launching new products. GSK Consumer
launched new toothpaste from its global portfolio, Parodontax, in the gum care
segment priced at INR100 for 80gms. Colgate launched a gum health variant, Colgate
Total Pro Gum Health, priced at priced at INR93 for 150gms, a discount of ~50% to
Parodontax. GSK launched a new variant of Sensodyne – Repair & Protect that repairs
teeth enamel damaged due to sensitivity.
• Dabur has signed South Indian actor Kajal Agarwal as the brand ambassador for its
brand Dabur Amla Nelli for endorsement in South Indian markets.
Dabur
5 Edelweiss Securities Limited
• Dabur International has developed a new line of skin care, shampoo, deodorant and
hair colour to be launched this year in the Middle Eastern region. These launches are
driven by expansion plans and growth strategy. Hair styling, skin care, depilatories and
oral care were the best performing product categories in Middle East in past. Hobi
Kozmetik, a leading personal care company of Turkey, was Dabur’s first overseas
acquisition and the second being Namaste Laboratories a hair care leader in African
American market. Acquisitions were targeted to gain entry into virgin categories and to
access advanced technologies in the highly developed consumer markets of Turkey and
US.
• Bajaj Corp took a weighted average price hike of 6%. We expect competitors like Dabur
Almond and Marico’s Hair & Care to follow.
• Pepsico launched ‘Tropicana fruit powders’ in INR10 single serve sachets which we
believe is a direct threat to Dabur’s Real. In our view needs to be more proactive in
innovation in existing categories as competition is heating up with ITC also hinting at
entry into the juice space.
Outlook and valuations: Positive; Maintain ‘BUY’
We believe Dabur is in a sweet spot with volume growth ahead of most peers and its
aggressive distribution drive (as highlighted in our previous notes). We expect both gross
margin and EBITDA margin to expand for Dabur as raw material price are benign and ad
spends, seen lower than FY13. Dabur has historically traded at 23-25x EPS; with significant
re-rating across the consumer goods space, we expect Dabur to continue to witness re-
rating as well. As we roll over to FY15, we assign 28x multiple arriving at target price of
INR176. The stock is trading at P/E of 28.4x and 23.6x on FY14E and FY15E, respectively. We
maintain ‘BUY’ and rate the stock ‘Sector Outperformer’ on relative return basis.
Consumer Goods
6 Edelweiss Securities Limited
Table 2: Consolidated segmental performance
Source: Company, Edelweiss research
Table 3: Standalone segmental performance
Source: Company, Edelweiss research
Year to March - Revenues (INR mn) Q4FY13 Q4FY12 % growth Y-o-Y Q3FY13 % growth Q-o-Q
Consumer care business 12,897 11,400 13.1 14,136 (8.8)
Foods business 1,927 1,613 19.4 1,649 16.8
Retail business 158 123 29.2 168 (5.5)
Others 329 500 (34.2) 354 (7.1)
Gross income (Excl other income) 15,311 13,636 12.3 16,307 (6.1)
Year to March - PBIT (INR mn)
Consumer care business 2,950 2,487 18.6 3,236 (8.8)
Foods business 302 313 (3.5) 181 66.5
Retail business (14) (29) NM (27) NM
Others 20 5 284.6 1 1,438.5
PBIT 3,258 2,775 17.4 3,391 (3.9)
Year to March - Margin
Consumer care business 22.9 21.8 106 22.9 (2)
Foods business 15.7 19.4 (371) 11.0 467
Retail business (8.8) (23.9) 1,514 (16.4) 758
Others 6.1 1.0 504 0.4 571
Margin 21.3 20.4 93 20.8 48
Year to March - Revenues (INR mn) Q4FY13 Q4FY12 % growth Y-o-Y Q3FY13 % growth Q-o-Q
Consumer care business 8,913 7,903 12.8 9,968 (10.6)
Foods business 1,714 1,389 23.4 1,578 8.6
Others 313 489 (36.0) 344 (8.9)
Gross income (Excl other income) 10,940 9,781 11.8 11,889 (8.0)
Year to March - PBIT (INR mn)
Consumer care business 2,475 2,040 21.3 2,561 (3.3)
Foods business 185 248 (25.6) 163 13.3
Others 15 (23) (164.3) (1) (1,223.1)
PBIT 2,674 2,266 18.0 2,722 (1.8)
Year to March - Margin
Consumer care business 27.8 25.8 195 25.7 208
Foods business 10.8 17.9 (708) 10.3 44
Others 4.7 (4.6) 930 (0.4) 504
Margin 24.4 23.2 128 22.9 155
Dabur
7 Edelweiss Securities Limited
Table 4: Standalone performance
Source: Company, Edelweiss research
(INR mn) Q4FY13 Q4FY12 YoY % Change Q3FY13 QoQ % Change
Net sales/income from operations 10,940 9,781 11.8 11,889 (8.0)
Other operating income 28 49 (42.7) 37 (25.5)
Total income from operations 10,968 9,830 11.6 11,927 (8.0)
Cost of materials consumed 4,412 4,066 8.5 4,429 (0.4)
Purchased of stock-in-trade 1,418 1,702 (16.7) 1,697 (16.5)
Changes in inventory (106) (507) NM 271 NM
Advertising & publicity 1,157 1,046 10.6 1,516 (23.7)
Employee benefits expenses 723 583 23.9 734 (1.5)
Other expenses 1,309 1,291 1.4 1,276 2.6
Total expenses 8,912 8,182 8.9 9,923 (10.2)
EBITDA 2,057 1,648 24.8 2,003 2.7
Other income 239 174 37.2 194 23.5
Depreciation and amortisation expense 189 173 9.1 198 (4.6)
Finance costs 68 (1) NM 10 599.0
PBT 2,039 1,650 23.6 1,989 2.5
Tax expense 443 330 34.0 415 6.6
PAT 1,597 1,320 21.0 1,574 1.4
As % of net sales
COGS 52.2 53.5 53.6
Advertising & publicity 10.5 10.6 12.7
Staff costs 6.6 5.9 6.2
Other expenditure 11.9 13.1 10.7
EBITDA 18.8 16.8 16.8
PBT 18.6 16.8 16.7
Net profit 14.6 13.4 13.2
Tax rate 21.7 20.0 20.9
Consumer Goods
8 Edelweiss Securities Limited
Chart 1: Q4FY13 sales contribution Chart 2: Q4FY13 YoY sales growth rates
Chart 3: Q4FY13 Domestic sales split Chart 4: FY13 Consumer care—Category contribution
Chart 5: Consumer care—Category growth rate Chart 6: FY13 International business growth rate
Source: Company, Edelweiss research
Domestic
70%
Internation
al
30%
Consumer
care
81%
Foods
16%
Others
3%
0.0
8.0
16.0
24.0
32.0
40.0
Ha
ir C
are
Ora
l Ca
re
He
alt
h s
up
p.
Dig
est
ive
s
Sk
in C
are
Ho
me
Ca
re
Fo
od
s
OT
C
Eth
ica
ls
(%)
Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q4FY13
0.0
3.5
7.0
10.5
14.0
17.5
Domestic International
(%)
Hair care
30%
Oral care
17%
Health
supplemen
ts
21%
Digestives
7%
Skin care
6%
Home care
7%
OTC &
Ethicals,
12%
0.0
12.0
24.0
36.0
48.0
60.0
GC
C
Eg
yp
t
Le
va
nt
Ba
ng
lad
esh
Ne
pa
l
(%)
Dabur
9 Edelweiss Securities Limited
Financial snapshot (INR mn)
Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13 FY14E FY15E
Net revenues 15,311 13,636 12.3 16,307 (6.1) 61,464 71,462 84,096
Other operating income 126 83 51.7 53 138.8 297 351 404
Total operating income 15,437 13,719 12.5 16,360 (5.6) 61,761 71,812 84,499
Cost of goods sold 7,399 6,849 8.0 7,954 (7.0) 30,193 35,118 41,143
Gross profit 8,038 6,870 17.0 8,406 (4.4) 31,568 36,694 43,356
Staff costs 1,209 956 26.4 1,230 (1.7) 4,712 5,503 6,475
Advt. sales & promotions 1,919 1,820 5.4 2,351 (18.3) 8,370 9,433 11,101
Other expenses 2,181 1,773 23.0 2,081 4.8 8,188 9,504 11,185
EBITDA 2,729 2,320 17.6 2,745 (0.6) 10,298 12,254 14,596
Depreciation & amortization 282 293 (4.0) 305 (7.7) 1,124 1,399 1,612
EBIT 2,447 2,026 20.8 2,440 0.3 9,174 10,856 12,984
Other income 230 114 102.3 220 4.3 945 1,076 1,230
EBIT including other income 2,677 2,140 25.1 2,660 0.6 10,119 11,932 14,214
Interest 150 57 161.9 78 92.5 589 535 509
Profit before tax 2,527 2,083 21.3 2,582 (2.1) 9,530 11,397 13,704
Provision for taxes 507 377 34.3 478 6.1 1,826 2,279 2,741
Core profit 2,020 1,706 18.4 2,105 (4.0) 7,704 9,117 10,963
PAT 2,020 1,706 18.4 2,105 (4.0) 7,658 9,117 10,963
Minority interest 15 - NM (6) NM 24 (10) (12)
Net profit 2,006 1,705 17.6 2,111 (5.0) 7,634 9,127 10,976
Diluted EPS (INR) 1.2 1.0 18.3 1.2 (4.0) 4.4 5.2 6.3
As % of net revenues
COGS 47.9 49.9 48.6 48.9 48.9 48.7
Employee cost 7.8 7.0 7.5 7.6 7.7 7.7
Other expenses 14.1 12.9 12.7 13.3 13.2 13.2
Adv. & sales promotions 12.4 13.3 14.4 13.6 13.1 13.1
EBITDA 17.7 16.9 16.8 16.7 17.1 17.3
EBIT 15.9 14.8 14.9 14.9 15.1 15.4
PBT 16.4 15.2 15.8 15.4 15.9 16.2
Reported net profit 13.0 12.4 12.9 12.4 12.7 13.0
Tax rate 20.1 18.1 18.5 19.2 20.0 20.0
Consumer Goods
10 Edelweiss Securities Limited
Company Description
Dabur has two divisions in India (post integration of consumer care division and consumer
health division) apart from its international operations. Consumer care division (CCD) offers
a wide range of products in hair care, oral care, health supplements, digestives and candies,
baby and skin care products based on ayurveda, over-the-counter (OTC) products, Asavs,
and branded ethical and classic products. CHD division has been merged with CCD to
leverage distribution. The second division, Dabur Foods Ltd produces fruit juices, cooking
pastes, sauces, and items for institutional food purchases. Dabur is unique among its
Consumer Goods peers because of its positioning as an Indian company whose products are
derived from exotic sources such as ancient ayurvedic texts and natural ingredients such as
herbs.
The company has various brand leaders in different market segments - Dabur
Chyawanprash, a health tonic, and Hajmola - a digestive tablet. Real, launched during 1996-
97, has also successfully carved its niche in the market.
Investment Theme
Dabur’s broad product portfolio provides a good play on Indian Consumer Goods spend by
virtue of its strong presence in less penetrated and high growth categories. Dabur’s
positioning on the ‘health and wellness’ platform, backed by its ANH
(ayurvedic/natural/herbal) image is very progressive. This, combined with its demonstrated
ability to create new categories and sub-categories, makes it well-placed to capture lifestyle
changes-led growth in the Consumer Goods space. Dabur has also demonstrated its ability
to make and integrate smart acquisitions (Balsara) that complement its product portfolio
and thereby drive inorganic growth. Improvement in margins of foods and international
businesses are expected to result in improvement in margins for the consolidated
operations.
Key Risks
A slowdown in rural demand due to lower government spending or monsoon failure could
impact Dabur’s revenues significantly. The company’s products such as Dabur
Chyawanprash and Dabur Lal Tail are prominently sold in rural areas, and hence, depends
upon growth in rural demand.
Further rise in competitive intensity in categories like Shampoo, Oral care, OTC and ethical
may further put pressure on volumes.
Management bandwidth post acquisition in various international geographies is a concern.
11 Edelweiss Securities Limited
Dabur
Financial Statements
Income statement (INR mn)
Year to March FY12 FY13E FY14E FY15E
Net revenue 52,832 61,464 71,462 84,096
Other Operating Income 223 297 351 404
Total operating income 53,054 61,761 71,812 84,499
Materials costs 26,852 30,193 35,118 41,143
Employee costs 3,874 4,712 5,503 6,475
Other Expenses 6,831 8,188 9,504 11,185
Advertisement & sales costs 6,595 8,370 9,433 11,101
EBITDA 8,902 10,298 12,254 14,596
Depreciation & Amortization 1,032 1,124 1,399 1,612
EBIT 7,869 9,174 10,856 12,984
Other income 574 945 1,076 1,230
Interest expenses 538 589 535 509
Profit before tax 7,905 9,530 11,397 13,704
Provision for tax 1,464 1,826 2,279 2,741
Net profit 6,441 7,704 9,117 10,963
Exceptional - (46) - -
Minority interest (8) 24 (10) (12)
Profit after minority interest 6,449 7,634 9,127 10,976
Diluted EPS (INR) 3.7 4.4 5.2 6.3
Dividend per share (INR) 1.3 1.5 1.8 2.2
Dividend payout (%) 35.1 35.1 35.1 35.1
Common size metrics
Year to March FY12 FY13E FY14E FY15E
Materials costs 50.6 48.9 48.9 48.7
Advertising & sales costs 12.4 13.6 13.1 13.1
Interest expenditure 1.0 1.0 0.7 0.6
EBITDA margins 16.8 16.7 17.1 17.3
Net profit margins 12.1 12.5 12.7 13.0
Growth ratios (%)
Year to March FY12 FY13E FY14E FY15E
Revenues 29.3 16.4 16.3 17.7
EBITDA 11.3 15.7 19.0 19.1
Net profit 13.2 19.6 18.4 20.2
EPS 13.0 19.6 18.4 20.2
Key Assumptions
Year to March FY12 FY13E FY14E FY15E
Macro
GDP(Y-o-Y %) 6.5 5.0 6.5 7.0
Inflation (Avg) 8.8 7.8 6.0 6.0
Repo rate (exit rate) 8.5 7.5 6.8 6.0
USD/INR (Avg) 47.9 54.5 55.0 53.0
Company
Revenue growth assumptions (Y-o-Y %)
Hair Oil (Domestic) sales growth 21.0 12.0 14.0 15.5
Chyawanprash (Domestic) sales growth 13.6 16.0 17.0 20.0
Honey (Domestic) sales growth 24.2 11.0 12.0 13.0
Tooth Powder & Paste (Domestic) sales growth 8.7 14.0 12.0 14.0
Hajmola (Domestic) sales growth 19.6 17.9 19.0 22.0
Asava - Arishta (Domestic) sales growth 10.4 23.0 17.0 15.0
Fruits, Nector & Drinks (Domestic) sales growth 57.5 30.0 23.0 25.0
Vegetable Pastes (Domestic) sales growth (11.1) 20.0 15.0 16.0
Export sales growth 28.5 22.0 21.0 23.0
Volume growth (domestic) 9.0 9.8 9.6 9.5
Pricing change (domestic) 5.6 5.8 5.6 7.3
International business growth 91.2 18.9 18.2 19.8
Excise duty as % of domestic sales 1.0 1.0 1.1 1.1
Cost assumptions
COGS as % of sales (Consol) 50.6 48.9 48.9 48.7
COGS as % of sales (standalone) 24.8 24.9 25.1 25.7
Staff costs as % of sales 7.3 7.7 7.7 7.7
A&P as % of sales 12.4 13.6 13.1 13.1
Coconut oil (Domestic) as % of COGS 8.5 8.8 9.0 9.3
Paradichlorobenzene (Domestic) as % of COGS 3.0 2.8 2.8 2.7
Light Liquid Parafin (Domestic) as % of COGS 8.0 8.0 8.4 8.6
Gold (Domestic) as % of COGS 2.3 2.4 2.4 2.3
Sorbitol Solution 70 % IP (Domestic) as % of COGS 2.3 2.4 2.4 2.7
Amla Green (Domestic) as % of COGS 1.2 1.2 1.2 1.2
Financial assumptions
Tax rate (%) 18.5 19.2 20.0 20.0
Capex (INR mn) 1,784 2,332 1,520 1,530
Debtor days 28 28 28 28
Inventory days 53 53 53 53
Payable days 103 114 114 115
Cash conversion cycle (days) (23) (33) (34) (34)
Interest rate on o/standing debt (%) 5.0 5.1 5.1 5.1
Depreciation as % of gross block 5.0 5.3 5.7 6.2
Dividend as % of net profit 35.1 35.1 35.1 35.1
Yield on cash 6.2 9.7 8.8 7.5
12 Edelweiss Securities Limited
Consumer Goods
Peer comparison valuation
Market cap Diluted PE (X) EV/EBITDA (X) ROAE (%)
Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E
Dabur 4,785 28.4 23.6 20.5 16.8 37.3 36.0
Colgate 3,717 33.2 28.2 24.3 20.5 112.6 115.0
Emami 1,803 25.7 21.5 21.6 17.8 44.3 45.1
GlaxoSmithKline Consumer Healthcare 3,142 33.1 28.5 23.3 19.9 35.1 33.9
Godrej Consumer 5,220 33.7 29.2 23.7 20.5 21.8 21.7
Hindustan Unilever 23,450 34.8 31.3 25.8 22.4 106.3 88.2
ITC 48,268 29.3 24.9 19.0 16.1 38.6 40.8
Marico 2,700 27.3 22.6 17.5 14.5 30.0 28.6
AVERAGE 32.8 27.5 21.9 18.5 48.9 47.1
Source: Edelweiss research
Cash flow metrics
Year to March FY12 FY13E FY14E FY15E
Operating cash flow 5,343 9,452 10,451 12,160
Investing cash flow (2,305) (2,332) (1,520) (1,530)
Financing cash flow (1,359) (4,205) (4,760) (5,489)
Net cash flow 1,679 2,915 4,171 5,141
Capex (1,784) (2,332) (1,520) (1,530)
Dividends paid (2,632) (3,116) (3,725) (4,480)
Profitability & efficiency ratios
Year to March FY12 FY13E FY14E FY15E
ROAE (%) 41.4 39.7 37.3 36.0
ROACE (%) 35.5 35.4 35.7 36.2
Inventory day 53 53 53 53
Debtors days 28 28 28 28
Payable days 103 114 114 115
Cash conversion cycle (days) (23) (33) (34) (34)
Current ratio 1.4 1.6 1.7 2.0
Debt/EBITDA 1.3 1.0 0.8 0.7
Debt/Equity 0.7 0.5 0.4 0.3
Adjusted debt/equity 0.7 0.5 0.4 0.3
Interest coverage 14.6 15.6 20.3 25.5
Operating ratios
Year to March FY12 FY13E FY14E FY15E
Total asset turnover 2.0 2.0 2.0 2.1
Fixed asset turnover 3.3 3.6 4.0 4.7
Equity turnover 3.4 3.2 2.9 2.8
Valuation parameters
Year to March FY12 FY13E FY14E FY15E
Diluted EPS (INR) 3.7 4.4 5.2 6.3
Y-o-Y growth (%) 13.0 19.6 18.4 20.2
CEPS (INR) 4.3 5.1 6.0 7.2
Diluted PE (x) 40.2 33.6 28.4 23.6
Price/BV (x) 9.0 7.9 6.8 5.9
EV/Sales (x) 4.9 4.1 3.5 2.9
EV/EBITDA (x) 29.2 24.9 20.5 16.8
Dividend yield (%) 0.9 1.0 1.2 1.5
Balance sheet (INR mn)
As on 31st March FY12 FY13E FY14E FY15E
Equity capital 1,742 1,742 1,742 1,742
Reserves & surplus 15,427 19,991 25,393 31,889
Shareholders funds 17,169 21,733 27,135 33,631
Minority interest (BS) 33 57 47 35
Short term debt 3,471 3,317 3,162 3,008
Long term debt 7,272 6,948 6,625 6,301
Current maturity of long term 492 470 448 426
Borrowings 11,235 10,735 10,235 9,735
Deferred tax liability 274 274 274 274
Sources of funds 28,711 32,799 37,691 43,675
Tangible assets 8,423 9,599 9,700 9,588
Intangible assets 7,990 7,990 7,990 7,990
CWIP (incl. intangible) 268 300 320 350
Total net fixed assets 16,680 17,888 18,010 17,928
Investments 4,825 4,825 4,825 4,825
Cash and equivalents 4,484 7,399 11,571 16,712
Inventories 8,239 8,900 10,339 12,177
Sundry debtors 4,617 4,738 5,491 6,482
Loans and advances 5,869 5,869 5,869 5,869
Other current assets 1,509 1,509 1,509 1,509
Total current assets (ex cash) 20,234 21,016 23,208 26,037
Trade payable 8,592 9,410 11,002 12,906
Other current liabilities 8,921 8,921 8,921 8,921
Net current assets (ex cash) 2,721 2,686 3,285 4,210
Uses of funds 28,711 32,799 37,691 43,675
Book value per share (INR) 16.5 18.8 21.6 25.1
Free cash flow (INR mn)
Year to March FY12 FY13E FY14E FY15E
Net profit 6,449 7,634 9,127 10,976
Add : Non cash charge 1,563 1,783 1,923 2,109
Gross cash flow 8,012 9,417 11,051 13,084
Less: Changes in WC 312 (36) 599 925
Operating cash flow 7,700 9,452 10,451 12,160
Less: Capex 1,784 2,332 1,520 1,530
Free cash flow 5,916 7,120 8,931 10,630
13 Edelweiss Securities Limited
Dabur
Top 10 holdings
Perc. Holding Perc. Holding
Genesis Indian Inv Co Ltd 2.32 Matthews International Capital 2.06
Life Insurance Corp Of India 1.83 First State Investments 1.79
Baring India Investments 1.50 Massachusetts Financial Services 0.66
Vanguard Group Inc 0.64 Harding Loevner Lp 0.48
Bank Of New York Mellon Corp 0.28 Hdfc Asset Management Co Ltd 0.26
*as per last available data
Insider Trades Reporting Data Acquired / Seller B/S Qty Traded
04 May 2012 Sunil Duggal Buy 50000
19 Jun 2012 Ambati Sudhakar Buy 44100
27 Jun 2012 Mr. P D Narang Sell 60000
10 Jul 2012 Mr. P D Narang Sell 15000
*in last one year
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
No Data Available
*in last one year
Additional Data
Directors Data
Dr. Anand Burman Non-Executive Chairman Mr. Amit Burman Vice Chairman
Mr. Saket Burman Promoter Director Mr. Mohit Burman Promoter Director
Mr. P. D. Narang Executive Director Mr. Sunil Duggal Executive Director, Chief Executive Officer
Mr. R. C. Bhargava Independent Non-Executive Director Mr. P. N. Vijay Independent Non-Executive Director
Dr. S. Narayan Independent Non-Executive Director Mr. Albert Wiseman Paterson Independent Non-Executive Director
Mr. Analjit Singh Independent Non-Executive Director Dr. Ajay Dua Independent Non-Executive Director
Auditors - M/s G. Basu & Co - Chartered Accountants; Internal Auditors:Price Waterhouse Coopers Pvt. Ltd
*as per last annual report
14 Edelweiss Securities Limited
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Asian Paints BUY SP M Bajaj Corp BUY SP M
Colgate HOLD SP M Dabur BUY SO M
Emami BUY SP H GlaxoSmithKline Consumer
Healthcare
HOLD SP M
Godrej Consumer BUY SO H Hindustan Unilever HOLD SP L
ITC BUY SO L Marico BUY SO M
Nestle Ltd HOLD SP L United Spirits BUY SO H
RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
15 Edelweiss Securities Limited
Dabur
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.
Board: (91-22) 4009 4400, Email: research@edelweissfin.com
Vikas Khemani Head Institutional Equities vikas.khemani@edelweissfin.com +91 22 2286 4206
Nischal Maheshwari Co-Head Institutional Equities & Head Research nischal.maheshwari@edelweissfin.com +91 22 4063 5476
Nirav Sheth Head Sales nirav.sheth@edelweissfin.com +91 22 4040 7499
Coverage group(s) of stocks by primary analyst(s): Consumer Goods
Asian Paints, Bajaj Corp, Colgate, Dabur, Godrej Consumer , Emami, Hindustan Unilever, ITC, Marico, Nestle Ltd, GlaxoSmithKline Consumer Healthcare,
United Spirits
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 120 49 17 186
* - stocks under review
Market Cap (INR) 118 56 12
Date Company Title Price (INR) Recos
Recent Research
30-Apr-13 Hindustan
Unilever
Volumes fair; margins lovely;
Result Update
584 Hold
18-Apr-13 Consumer
Times
Update on Indian Consumer
Sector;
Sector Update
03-Apr-13 Hindustan
Unilever
Volumes trip on competitive
lather;
Visit Note
471 Reduce
> 50bn Between 10bn and 50 bn < 10bn
Buy Hold Reduce Total
Rating Interpretation
Buy appreciate more than 15% over a 12-month period
Hold appreciate up to 15% over a 12-month period
Reduce depreciate more than 5% over a 12-month period
Rating Expected to
16 Edelweiss Securities Limited
Consumer Goods
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