Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dabur India (DABUR)
Consumer products
Uninspiring performance. Dabur’s underlying 4QFY11 consolidated sales growth
(excluding impact of acquisitions) of 13% was below our estimate of 16% due to
lower-than-expected growth in domestic business. Recurring PAT was flat, in line with
estimates. Dabur Amla hair oil performance during the quarter was good (~15%
volume growth, in our view), partially aided by narrowing of retail price between
coconut oil and value added hair oil. We are disappointed with the quality of results as
reported PAT growth was boosted by significant cut in adspends and higher other
income. We have cut our FY2012E EPS estimates by 3%. We roll over estimates to
FY2013E; retain ADD rating and our target price of Rs110.
Reported PAT better than expected; however, lacks quality (higher other income, cut in adspends)
Dabur reported consolidated net sales of Rs11.1 bn (+31%, KIE Rs9.9 bn), EBITDA of Rs2.1 bn
(+27%, KIE Rs1.9 bn) and PAT of Rs1.5 bn (+10%, KIE Rs1.4 bn).
Consolidated sales of Rs11.1 bn include sales from Hobi and Namaste (which is not in the base)
amounting to Rs1,460 mn. On a like to like basis, consolidated sales growth is 13% which
includes pricing growth of ~4.7% and volume growth of 9.3%. Standalone sales growth is at
14% for the quarter. Volume growth in standalone (India) business is ~9%, in our view.
Likely reclassification between material cost and other expenditure of Namaste led to 445 bps
increase in other expenditure and 116 bps decline in material cost in the consolidated financials.
EBITDA margin declined 53 bps during the quarter. At a standalone level, gross margins
declined by 134 bps but significant cut in adspends by 367 bps helped EBITDA margin
expansion of 246 bps to 20.6%. The cut in adspends is due to phasing benefit (of new
launches) and not due to any reduction in competitive activity (except hair oil), in our view.
Consolidated PAT margin declined 243 bps at 13% on account of higher interest cost (+208%),
higher depreciation (+68%) and higher effective tax rate (ETR at 22% in 4QFY11 against 16%
in 4QFY10).
Retain ADD
We tweak estimates marginally as we model lower sales growth in domestic business due to
higher competitive activity. We have cut our FY2012E EPS estimates by 3%. Retain ADD and
target price of Rs110 even as we roll forward to FY2013E estimates (ascribing a P/E of 25X). Our
EPS estimates are Rs3.7 and Rs4.3 for FY2012E and FY2013E, respectively. Key risks to our ADD
rating are (1) limited pricing power, which makes Dabur vulnerable to input cost inflation, (2)
Dabur is not a market leader in many categories, (3) the company is heavily dependent on North
India (35% of sales) and (4) any prolonged unrest in its key international markets impacting
operations (sales as well as margins).
Category-wise analysis
In line with our expectations, Dabur amla showed strong sales growth of 22% which we
would attribute to the narrowing MRP between coconut oil and value added hair oil
(32% price hike taken in Parachute). Despite a robust performance in hair oil, the overall
hair care segment witnessed 11% growth due to sharp decline in shampoo sales by 32%
(30% decline in 3QFY11, 14% decline in 2QFY11, 17% decline in 1QFY11). While the
company has improved the value proposition of Vatika shampoo by offering 40% extra
millage, we believe that micro-marketing initiatives by HUL, P&G and aggressive tradespend
driven growth strategy of ITC is likely hurting Dabur.
Oral care sales grew by 9% with toothpaste growing by 12%. In 4QFY11, the company
has taken price hike in Lal Dant Manjan by 6% and in Red toothpaste by 7%.
Toothpowder forms ~30% of sales and sales increased marginally ~1%.
Health supplements sales grew by 21%. The company has taken ~7% price hike in
Chyawanprash and 5% in Dabur Glucose in 4QFY11. Nutrigo, launched in 3QFY11, is
doing well and has met management expectations. GSK Consumer has also launched
Glucose under its Boost brand which could likely increase adspends on the category (in
Eastern region where both Dabur and GSK Consumer has strong distribution networks).
Foods grew by 30% which was largely volume driven with good growth in Hommade
and Real.
Skin care sales grew by 26% with Fem portfolio growing by 21.5%. The company has
taken ~9% price hike in Gulabari in 4QFY11.
Consumer Health Division (CHD) sales grew by 14%, of which about 7% was pricing led
(inflation in key inputs like menthol).
International business division (IBD) sales grew by 9.5% in Rupee terms and 12.9% in
constant currency terms (excluding the new acquisitions). Performance during the quarter
was impacted by economic and political disruptions in the MENA region. Hobi sales
during the quarter was Rs280 mn and Namaste was Rs1,180 mn. Namaste EBITDA
margin was ~16%, which is a significant improvement from the 13% reported at the
time of acquisition.
Looking ahead—FY2012E
Continued input cost inflation in LLPO, herbs may likely impact margins. We do not view
margin management on the back of significant cut in adspends (as in 4QFY11) positively
given significant competitive activities in most categories which would necessitate
investment behind brands. Average adspends in FY2011 was 13.2% against 14.6% in
FY2010. We model 12% adspends in FY2012E.
The company is likely to introduce new products/launches in the CHD division in the areas
of gastro, pain management etc. in FY2012E, in our view. The company is bullish on this
segment and has identified it as a growth driver, likely to leverage on its ayurvedic
position versus pharmaceutical companies. It is in the process of improving the
distribution coverage within the pharma distribution channel.
Hobi and Namaste will get integrated during the year and the company will likely focus
on cross pollination of products across geographies. We would watch for sustainability of
Namaste margins at 16% levels.
In shampoo, yoy sales growth may turn positive in FY2012E on the back of a low base.
However, we remain cautious on the underlying volume growth in this segment given the
significant competitive intensity and the likely commoditization of the category – P&G has
cut the price of Pantene (supposedly a premium brand competing with Dove) by ~20%
across SKUs recently.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dabur India (DABUR)
Consumer products
Uninspiring performance. Dabur’s underlying 4QFY11 consolidated sales growth
(excluding impact of acquisitions) of 13% was below our estimate of 16% due to
lower-than-expected growth in domestic business. Recurring PAT was flat, in line with
estimates. Dabur Amla hair oil performance during the quarter was good (~15%
volume growth, in our view), partially aided by narrowing of retail price between
coconut oil and value added hair oil. We are disappointed with the quality of results as
reported PAT growth was boosted by significant cut in adspends and higher other
income. We have cut our FY2012E EPS estimates by 3%. We roll over estimates to
FY2013E; retain ADD rating and our target price of Rs110.
Reported PAT better than expected; however, lacks quality (higher other income, cut in adspends)
Dabur reported consolidated net sales of Rs11.1 bn (+31%, KIE Rs9.9 bn), EBITDA of Rs2.1 bn
(+27%, KIE Rs1.9 bn) and PAT of Rs1.5 bn (+10%, KIE Rs1.4 bn).
Consolidated sales of Rs11.1 bn include sales from Hobi and Namaste (which is not in the base)
amounting to Rs1,460 mn. On a like to like basis, consolidated sales growth is 13% which
includes pricing growth of ~4.7% and volume growth of 9.3%. Standalone sales growth is at
14% for the quarter. Volume growth in standalone (India) business is ~9%, in our view.
Likely reclassification between material cost and other expenditure of Namaste led to 445 bps
increase in other expenditure and 116 bps decline in material cost in the consolidated financials.
EBITDA margin declined 53 bps during the quarter. At a standalone level, gross margins
declined by 134 bps but significant cut in adspends by 367 bps helped EBITDA margin
expansion of 246 bps to 20.6%. The cut in adspends is due to phasing benefit (of new
launches) and not due to any reduction in competitive activity (except hair oil), in our view.
Consolidated PAT margin declined 243 bps at 13% on account of higher interest cost (+208%),
higher depreciation (+68%) and higher effective tax rate (ETR at 22% in 4QFY11 against 16%
in 4QFY10).
Retain ADD
We tweak estimates marginally as we model lower sales growth in domestic business due to
higher competitive activity. We have cut our FY2012E EPS estimates by 3%. Retain ADD and
target price of Rs110 even as we roll forward to FY2013E estimates (ascribing a P/E of 25X). Our
EPS estimates are Rs3.7 and Rs4.3 for FY2012E and FY2013E, respectively. Key risks to our ADD
rating are (1) limited pricing power, which makes Dabur vulnerable to input cost inflation, (2)
Dabur is not a market leader in many categories, (3) the company is heavily dependent on North
India (35% of sales) and (4) any prolonged unrest in its key international markets impacting
operations (sales as well as margins).
Category-wise analysis
In line with our expectations, Dabur amla showed strong sales growth of 22% which we
would attribute to the narrowing MRP between coconut oil and value added hair oil
(32% price hike taken in Parachute). Despite a robust performance in hair oil, the overall
hair care segment witnessed 11% growth due to sharp decline in shampoo sales by 32%
(30% decline in 3QFY11, 14% decline in 2QFY11, 17% decline in 1QFY11). While the
company has improved the value proposition of Vatika shampoo by offering 40% extra
millage, we believe that micro-marketing initiatives by HUL, P&G and aggressive tradespend
driven growth strategy of ITC is likely hurting Dabur.
Oral care sales grew by 9% with toothpaste growing by 12%. In 4QFY11, the company
has taken price hike in Lal Dant Manjan by 6% and in Red toothpaste by 7%.
Toothpowder forms ~30% of sales and sales increased marginally ~1%.
Health supplements sales grew by 21%. The company has taken ~7% price hike in
Chyawanprash and 5% in Dabur Glucose in 4QFY11. Nutrigo, launched in 3QFY11, is
doing well and has met management expectations. GSK Consumer has also launched
Glucose under its Boost brand which could likely increase adspends on the category (in
Eastern region where both Dabur and GSK Consumer has strong distribution networks).
Foods grew by 30% which was largely volume driven with good growth in Hommade
and Real.
Skin care sales grew by 26% with Fem portfolio growing by 21.5%. The company has
taken ~9% price hike in Gulabari in 4QFY11.
Consumer Health Division (CHD) sales grew by 14%, of which about 7% was pricing led
(inflation in key inputs like menthol).
International business division (IBD) sales grew by 9.5% in Rupee terms and 12.9% in
constant currency terms (excluding the new acquisitions). Performance during the quarter
was impacted by economic and political disruptions in the MENA region. Hobi sales
during the quarter was Rs280 mn and Namaste was Rs1,180 mn. Namaste EBITDA
margin was ~16%, which is a significant improvement from the 13% reported at the
time of acquisition.
Looking ahead—FY2012E
Continued input cost inflation in LLPO, herbs may likely impact margins. We do not view
margin management on the back of significant cut in adspends (as in 4QFY11) positively
given significant competitive activities in most categories which would necessitate
investment behind brands. Average adspends in FY2011 was 13.2% against 14.6% in
FY2010. We model 12% adspends in FY2012E.
The company is likely to introduce new products/launches in the CHD division in the areas
of gastro, pain management etc. in FY2012E, in our view. The company is bullish on this
segment and has identified it as a growth driver, likely to leverage on its ayurvedic
position versus pharmaceutical companies. It is in the process of improving the
distribution coverage within the pharma distribution channel.
Hobi and Namaste will get integrated during the year and the company will likely focus
on cross pollination of products across geographies. We would watch for sustainability of
Namaste margins at 16% levels.
In shampoo, yoy sales growth may turn positive in FY2012E on the back of a low base.
However, we remain cautious on the underlying volume growth in this segment given the
significant competitive intensity and the likely commoditization of the category – P&G has
cut the price of Pantene (supposedly a premium brand competing with Dove) by ~20%
across SKUs recently.
No comments:
Post a Comment