Dabur India (Q4 FY13)

India Infoline News Service | Mumbai |

Dabur registered modest 12.5% yoy revenue growth during Q4 FY13 at Rs15.4bn – marginally below our expectations of Rs15.5bn mainly due slower growth in international business.

CMP Rs151, Target Rs169, Upside 11.8%

  • Dabur registered modest 12.5% yoy revenue growth during Q4 FY13 at Rs15.4bn – marginally below our expectations of Rs15.5bn mainly due slower growth in international business. Domestic business revenues (contributing ~70% to consolidated sales) increased by 15.1% yoy to ~Rs11bn fuelled by healthy growth across key categories (except Digestives, up by 1.3% yoy due to high base effect). Dabur registered strong domestic volume growth of 12% yoy - highest in last 11 quarters, driven by recovery in CSD sales and increased rural distribution. The management expects to maintain the current trajectory of volume growth in the coming quarters.

  • The hair care segment crossed Rs10bn mark in revenues during FY13. For Q4 FY13, the segment recorded 9.6% yoy growth led by robust 29.4% yoy growth in shampoos. Hair oils registered 7% yoy growth driven by 13% yoy growth in perfumed hair oils (Dabur Amla – hair oil 14%). Coconut oils portfolio sales remained under pressure due to increased price differential with loose oil during the quarter. The management expects growth in the coconut hair oil portfolio to improve only once the differential pricing between its brand Dabur Vatika and other base coconut oils normalize.

  • Oral care segment reported healthy 12.3% yoy growth driven by the premium toothpaste portfolio (Dabur Red Toothpaste and Meswak). Toothpowder sales grew by mere 3% yoy during the quarter. The toothpaste segment growth (15.8% yoy) could have been even better but for the weak performance of mass segment brand Babool which registered flat revenue growth. The management expects growth for mass market to pick up in FY14.

  • Home care segment witnessed sharp 33.3% yoy increase in revenues driven by strong performance of Odomos, Odonil (50% of home care) and Sanifresh brands. We expect growth in this segment to normalize at ~20% levels over the next few quarters. Digestives segment revenues grew by mere 1.3% yoy due to a high base effect and impact on volumes due to steep price hike in Hajmola brand. 

  • Skin care segment registered 11.1% yoy growth driven by double-digit growth in Gulabari and Fem (11.6% yoy) on account of strong growth in rural markets. The quarter saw launches and re-launches in the Fem and Gulabari portfolio. Health supplements segment recorded healthy 22.6% yoy revenue growth driven by strong growth in honey and glucose.

  • Foods segment registered 22.6% yoy growth driven by Real portfolio. However, the management expects a slower rate of growth in discretionary consumption in future due to which these growth rates are likely to slow down in the coming quarters. According to the management currency depreciation and high raw material prices resulted in compression in food margin. Further countervailing duty (CVD) impacted margins although now that will anniversarize. Going forward, margin improvement is expected to come from supply chain benefits and not pricing as it is already higher than the international standards.

  • International business registered 11.6% yoy growth primarily led by 19.7% yoy growth in the organic business and 42% yoy in Hobi. The reorganization of the Namaste business is now complete and the management expects this business to record strong 15-20% growth in FY14. The management expects the international business to record 15% yoy growth in FY14.

  • Operating margins for the quarter expanded by ~80bps to 17.8% aided by sharp 200bps/80bps decline in raw material and advertising cost. A ~90bps/120bps increase in staff/overhead cost restricted further margin expansion. The management expects adspends to sales ratio for FY14 to be ~13% (~50bps lower than FY13) as this level is enough given its high base and recovered volume growth. Adjusted net profit increased by 17.6% yoy to Rs2bn (in line with our expectations) led by higher other income and improved operating efficiency.

Cost analysis
As a % of net sales Q4 FY13 Q4 FY12 bps yoy Q3 FY13 bps qoq
Material cost 47.9 49.9 (199) 48.6 (69)
Personnel cost 7.8 7.0 86 7.5 32
Advertising cost 12.4 13.3 (84) 14.4 (193)
Other overheads 14.1 12.9 120 12.7 141
Total costs 82.3 83.1 (77) 83.2 (90)
Source: India Infoline Research

  • Dabur has a unique mix of seven diverse growth engines in the FMCG space, which have a potential of delivering strong revenue growth. The company continues to record strong volume led domestic growth. International business is expected to record 15% yoy growth in FY14 led by Hobi and Namaste business. With business restructuring at Namaste now complete, the management expects it to record ~15% yoy growth in FY14 against 10% decline in FY13. Dabur is also likely to benefit from stable input prices and lower adspends in FY14. The management expects ~100-150bps expansion in gross margins, so we have increased our margin expectations for the next two years. However, we have reduced our revenue estimates for FY14/FY15 by 3.2%/3.5% respectively due to lower revenue growth in FY13. We expect Dabur to witness revenue and earnings CAGR of 15.2% and 16.9% respectively over FY13-15. At the current market price of Rs151, the stock is trading at 25x FY15E EPS of Rs6. Recommend Buy with a revised 9-mth price target of Rs169 (earlier Rs142).

Results table
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Net sales 15,437 13,719 12.5 16,360 (5.6)
Material cost (5,873) (5,951) (1.3) (6,180) (5.0)
Purchase of FG (1,526) (898) 69.9 (1,773) (14.0)
Personnel cost (1,209) (956) 26.4 (1,230) (1.7)
Advertising cost (1,919) (1,820) 5.4 (2,351) (18.3)
Other overheads (2,181) (1,773) 23.0 (2,081) 4.8
Operating profit 2,729 2,320 17.6 2,745 (0.6)
OPM (%) 17.7 16.9 77 bps 16.8 90 bps
Depreciation (282) (293) (4.0) (305) (7.7)
Interest (150) (57) 161.9 (78) 92.5
Other income 230 114 102.3 220 4.3
PBT 2,527 2,083 21.3 2,582 (2.1)
Tax (507) (377) 34.3 (478) 6.1
Effective tax rate (%) 20.1 18.1 - 18.5 -
Minority interest (15) (0) - 6 -
Reported PAT 2,006
BSE 341.10 [4.25] ([1.23]%)
NSE 342.25 [1.95] ([0.57]%)

***Note: This is a NSE Chart

 

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