Dabur India F2Q11: Revenue Growth Dissapoints :: Morgan Stanley

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Dabur India
F2Q11: Revenue Growth
Dissapoints
We Retain EW: Dabur reported consolidated revenue,
operating profit, and adjusted PAT growth of 15%, 17%,
and 15%, respectively. These figures compare with our
expectations of 20%, 18%, and 16% growth,
respectively. Domestic business witnessed growth of
13%, 8%, and 1.4% in revenues, operating profit, and
PAT, respectively. The key highlights of the result are: 1)
sluggish 15% revenue growth in the Consumer Care
business; 2) 210bp decline in the gross profit margin for
the consolidated business; and 3) the lowest operating
profit margin for the Consumer Health division in 18
quarters.
Key highlights of the performance are:
1) Consumer Care division revenue grew 15% in F2Q11
(largely volume led) and 18% in F1H11 driven by Hair
Oils (6%), Oral Care (15%), Health Supplements (36%),
Skin care (11%), Digestives (14%), and Home Care
(37%).

2) Hair oils grew by 14.9% in F1H11 driven by
Dabur Amla (15%, despite increased competitive
activity), Vatika (11%), and Anmol Coconut Oil (7%);
shampoo revenue declined by 15% in F1H11.

3)
Toothpastes grew 20.5% driven by Dabur Red, Meswak
(16.2%), and Babool (21.5%). Even Red Toothpowder
grew this quarter, driven by the launch of the Rs0.5
sachet.

4) Interestingly, the cash cow businesses
witnessed strong growth during F1H11, led by Dabur
Chyawanprash (50.4%), Hajmola tablets (22.3%), and
Lal Tail (13.7%).

5) Skin care (11%) disappointed with
the Fem portfolio growing by 10% in F1H11 even as
Gulabari grew 15.5%.

6) Home Care business
performed exceptionally well with revenue growth of
37.4% in F1H11, driven by strong growth in Sanifresh
(26.1%), Odonil (73.4%), and Odomos (32.9%).

7)
According to management, the Consumer Health
division recorded 12.6% revenue growth in F1H11 and
14.8% in F2Q11, driven by aggressive marketing efforts.
Interestingly, the operating profit margin reported for the
business was the lowest in 18 quarters.

8) Consolidated
operating profit improved by 50bp even as consolidated
gross margins declined by 210bp.


9) The consolidated ad spending-to-sales ratio declined
170bp whereas the standalone ad spending to sales ratio
declined only 30bp.

10) International business performed
well with same-currency growth of 29% largely volume
driven.

11) Overall capital employed increased by 11%,
due to strategic stocking and higher loans and advances.

Dabur acquisition of Turkish company, Hobi Kozmetik, is
prima facie expensive: Hobi Kozmetik is a manufacturer of
personal care products in Turkey, with leading market share of
35% in hair gel category. While we await more details on the
acquisition, prima facie, the acquisition at 2.6x sales and
around 15x EBITDA appears expensive, in our view.