Dabur India (Q1 FY15)

India Infoline News Service | Mumbai |

Dabur recorded healthy 13.2% yoy revenue growth during Q1 FY15 at Rs18.6bn - in line with our expectation driven by ~13% and ~18% yoy growth in domestic and international businesses respectively.

CMP Rs200, Target Rs231, Upside 15.3%
  • Dabur matched our expectations by recording healthy ~13% yoy revenue growth at Rs18.6bn driven by 8.8% yoy volume growth during Q1 FY15

  • Domestic FMCG business revenues increased by 11% yoy driven by 8.3% yoy underlying volume growth while international business registered 18% yoy growth

  • Operating margins remained flat at 14.4% due to 50bps increase in raw material cost. Lower overhead and advertising cost cushioned margins. Adjusted net profit recorded 13.4% yoy growth at Rs2.1bn, in line with our expectations

  • We expect Dabur to witness a revenue/PAT CAGR of ~15%/17% respectively over FY14-16. Maintain Buy with 9-mth price target of Rs231

Result table
(Rs m) Q1 FY15 Q1 FY14 % yoy Q4 FY14 % qoq
Net sales 18,639 16,470 13.2 17,690 5.4
Other operating income 50 54 (8.5) 54 (8.0)
Total income 18,689 16,524 13.1 17,744 5.3
Material cost (7,115) (6,171) 15.3 (7,014) 1.4
Purchase of FG (2,111) (1,902) 11.0 (1,567) 34.8
Advertising cost (2,863) (2,542) 12.6 (2,284) 25.3
Personnel cost (1,569) (1,379) 13.8 (1,529) 2.7
Other overheads (2,350) (2,153) 9.2 (2,397) (2.0)
Operating profit 2,681 2,377 12.8 2,954 (9.3)
OPM (%) 14.4 14.4 (5) bps 16.7 (232) bps
Depreciation (267) (220) 21.4 (263) 1.5
Interest (101) (133) (24.1) (137) (26.2)
Other income 359 331 8.6 383 (6.3)
PBT 2,672 2,354 13.5 2,938 (9.1)
Tax (560) (484) 15.7 (582) (3.8)
Effective tax rate (%) 21.0 20.6 - 19.8 -
Minority interest (3) (10) (68.9) (2) -
Adjusted PAT 2,108 1,860 13.4 2,353 (10.4)
Adj. PAT margin (%) 11.3 11.3 2 bps 13.3 (199) bps
Extra ordinary items - - - (1) -
Reported PAT 2,108 1,860 13.4 2,353 (10.4)
Ann. EPS (Rs) 4.8 4.3 12.5 5.4 (11.1)
Source: Company, India Infoline Research

Results in line with expectations

Dabur recorded healthy 13.2% yoy revenue growth during Q1 FY15 at Rs18.6bn - in line with our expectation driven by ~13% and ~18% yoy growth in domestic and international businesses respectively. Adjusted net profit too matched our expectations by recording 13.4% yoy growth at Rs2.1bn.

Domestic FMCG business revenues (contributing ~65% to consolidated sales) increased by ~13% yoy driven by 8.3% yoy underlying volume growth. The management expects   to achieve ~8-10% volume growth for its domestic business in H1 FY15. H2 FY15 growth is expected to be much better than H1.

  • The hair care segment registered 8.4% yoy growth during Q1 FY15 driven by 7.1% yoy growth in hair oils and 15.3% yoy increase in shampoo segment revenues. The company plans to relaunch Dabur Amla hair oil in the next few months. The management is less optimistic about hair care segment growth as it believes the hair care space is commoditised.

  • Oral care segment reported slower 8% yoy growth driven by 10.7% yoy growth in the toothpaste business (Dabur Red Toothpaste and Meswak).
  • Home care segment witnessed 14.7% yoy increase in revenues driven by strong performance of Odonil (double digit growth, 50% of home care). Growth is being boosted by new formats such as gels.
  • Skin care segment growth was muted at 4.4% yoy due to slowdown in the category. Fem bleach registered double digit growth and improved market share. Oxy bleach did not perform well.

  • Health supplements segment recorded healthy 21.6% yoy revenue growth driven by delayed monsoon which benefited glucose sales (registered double digit growth and strong gains in market share). Digestives segment revenues grew by 11.3% yoy driven by strong growth in its Hajmola (double digit growth) brand. OTC and Ethicals portfolio grew by mere 4.4% yoy in Q1 FY15. However, the outlook is good with a slew of new launches planned. During the quarter, Dabur has launched Hepano, a product for liver problem.

  • Foods segment registered 21.6% yoy growth driven by strong growth in its beverage segment across channels and regions. Real portfolio recorded strong 24% yoy growth with gain in market share. Culinary segment witnessed 22% yoy growth during the quarter.

International business registers strong 18% yoy growth

International business contributing 35% to consolidated sales registered 18% yoy growth (constant currency growth of 12.4% yoy) at ~Rs5.3bn led by healthy growth in GCC (21%), Egypt (28%), Turkey (32%) and Levant (27%) (comprising Yemen, Jordan, Lebanon & Syria) markets. Namaste business is gradually recovering and African business is growing faster than the US and Namaste. However Namaste margins are likely to improve in H2 FY15.

Project CORE

For increasing its distribution reach through chemist channel Dabur has launched project CORE in Q3 FY14. This is primarily done for increasing growth of healthcare brands as well as certain personal care and home care brands. The company has hired 350 sales personnel for this project. The company’s direct chemist reach has increased to 53,300 outlets and it plans to take it to 75,000 chemist stores by end of FY15.

Operating margins remained flat at 14.4%

Operating margins remained flat at 14.4% mainly due to 50bps increase in raw material cost. Lower overhead and advertising cost cushioned operating margins.


Cost analysis
As a % of net sales Q1 FY15 Q1 FY14 bps yoy Q4 FY14 bps qoq
Material cost 49.5 49.0 48 48.5 100
Advertising cost 15.4 15.4 (8) 12.9 245
Personnel cost 8.4 8.4 4 8.6 (22)
Other overheads 12.6 13.1 (46) 13.6 (94)
Source: Company, India Infoline Research

Maintain Buy

Dabur has a unique mix of eight diverse growth engines in the FMCG space, which have a potential of delivering strong revenue growth. The company continues to record healthy volume led domestic growth. The management remains confident of achieving 8-10% volume growth in H1 FY15 driven by distribution expansion and product innovations. Further it expects H2 FY15 to be better than H1. The management targets to register ~RS125bn revenues without acquisition over the next four years (implied 16% sales CAGR). International business too is expected to record healthy growth led by Hobi and Namaste business. We expect Dabur to witness revenue and earnings CAGR of ~15% and 17% respectively over FY14-16. At the current market price of Rs200, the stock is trading at 27.7x FY16E EPS of Rs7.2. Maintain Buy with a 9-mth price target of Rs231.


Financial Summary
Y/e 31 Mar (Rs m) FY13 FY14 FY15E FY16E
Revenues 61,464 70,732 81,058 93,318
yoy growth (%) 16.3 15.1 14.6 15.1
Operating profit 9,878 11,564 13,753 16,033
OPM (%) 16.1 16.3 17.0 17.2
Pre-exceptional PAT 7,680 9,146 10,686 12,587
Reported PAT 7,634 9,139 10,686 12,587
yoy growth (%) 18.4 19.7 16.9 17.8
EPS (Rs) 4.4 5.2 6.1 7.2
P/E (x) 45.4 38.2 32.7 27.7
Price/Book (x) 16.7 13.1 9.4 7.0
EV/EBITDA (x) 36.1 30.4 25.4 21.6
Debt/Equity (x) 0.5 0.3 0.2 0.1
RoE (%) 40.3 38.5 33.5 28.9
RoCE (%) 33.1 35.4 35.9 32.7
Source: Company, India Infoline Research

***Note: This is a NSE Chart

 

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