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UBS Investment Research
Dabur India Ltd.
Managed growth; profits in line
Q3 FY11 revenues +17%, ~13% volume growth
Dabur’s Q3 revenues were at Rs10.8bn (+17% YoY), underlying ~13% volume
growth. Categories that have contributed to higher growth are health supplements
and foods. The consumer care division (CCD) and the consumer healthcare
division (CHD) grew 16% and 14%, respectively, and foods 30% YoY. EBITDA
was at Rs2.09bn and PAT at Rs1.54bn (UBS-e Rs1.6bn) due to higher depreciation
(ESOP amortisation).
RM pressures neutralised by rational ASPs
RM inflation, especially in coconut oil and light liquid paraffin (LLP), pushed
RM/sales to 48.4% in Q311 from 45.6% in Q310. EBITDA margins were
maintained as ASPs were down from 14.6% to 12.5% of revenues YoY. Segmental
margins in CHD declined to 23% from 25% YoY (due to packaging cost and
inflation in input herbs). Losses in the retail business were contained at Rs20m.
Conference call schedule tomorrow
Management has scheduled a conference call to discuss the results at 4pm on 1
February. Primary dial in: 022 30650117.
Valuation: maintain Neutral rating
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
11% and a terminal year growth rate of 3%.
Dabur India Ltd.
Dabur is the market leader in consumer products based on the traditional Indian
ayurvedic herbal system of medicine. It has evolved to become one of the largest
Indian-owned consumer goods companies. It has a fairly well-diversified
product profile. It operates in the following consumer product categories: hair
oil, health supplements (Chyawanprash and digestives), oral care, shampoos,
baby care, skin care, home care, and foods (juices and cooking pastes).
Statement of Risk
We believe the key risk to Dabur is the limited appeal of traditional Ayurvedic
products, as consumer lifestyles change. Another risk is low tax rates because of
factory locations in areas that are designated as tax benefit zones; any change in
this law could affect earnings, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Dabur India Ltd.
Managed growth; profits in line
Q3 FY11 revenues +17%, ~13% volume growth
Dabur’s Q3 revenues were at Rs10.8bn (+17% YoY), underlying ~13% volume
growth. Categories that have contributed to higher growth are health supplements
and foods. The consumer care division (CCD) and the consumer healthcare
division (CHD) grew 16% and 14%, respectively, and foods 30% YoY. EBITDA
was at Rs2.09bn and PAT at Rs1.54bn (UBS-e Rs1.6bn) due to higher depreciation
(ESOP amortisation).
RM pressures neutralised by rational ASPs
RM inflation, especially in coconut oil and light liquid paraffin (LLP), pushed
RM/sales to 48.4% in Q311 from 45.6% in Q310. EBITDA margins were
maintained as ASPs were down from 14.6% to 12.5% of revenues YoY. Segmental
margins in CHD declined to 23% from 25% YoY (due to packaging cost and
inflation in input herbs). Losses in the retail business were contained at Rs20m.
Conference call schedule tomorrow
Management has scheduled a conference call to discuss the results at 4pm on 1
February. Primary dial in: 022 30650117.
Valuation: maintain Neutral rating
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
11% and a terminal year growth rate of 3%.
Dabur India Ltd.
Dabur is the market leader in consumer products based on the traditional Indian
ayurvedic herbal system of medicine. It has evolved to become one of the largest
Indian-owned consumer goods companies. It has a fairly well-diversified
product profile. It operates in the following consumer product categories: hair
oil, health supplements (Chyawanprash and digestives), oral care, shampoos,
baby care, skin care, home care, and foods (juices and cooking pastes).
Statement of Risk
We believe the key risk to Dabur is the limited appeal of traditional Ayurvedic
products, as consumer lifestyles change. Another risk is low tax rates because of
factory locations in areas that are designated as tax benefit zones; any change in
this law could affect earnings, in our view.
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