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Growth momentum slowed
Dabur’s 4Q earnings at Rs1.5bn (+10% YoY) – lower than 15% in
9mFY11 - due to higher tax and the middle-east impact. Volume growth
also moderated to 9.3% from 13%. The management plans to focus on
growth in FY12 which may be at the expense of margin but appears to be
a correct strategy in the context of competitive scenario. Current
valuations at 24x FY12 earnings are in-line with historical average and
should sustain in the context of ~20% EPS Cagr over FY11-13CL.
4Q earnings growth below par
Dabur’s 4Q consol. Ebitda grew 27% YoY to Rs2bn (numbers not comparable
due to acquisitions). Like-to-like revenue growth came in at 14% with
underlying volume growth of 9.3%, lowest in the last many quarters;
acquisitions (Hobi, Namaste) added 16ppt to the topline. During FY11 and
4QFY11, the company’s effective tax rate has gone up 3ppts and 6 ppts
respectively due to higher MAT rates and certain one–offs. We expect the
c.20% earnings growth to resume from FY12 onwards.
Mixed performance by different segments
Dabur’s diversified portfolio helped in FY11 as it managed to grow domestic
business by ~15% driven by strong growth in toothpaste (17%),
supplements (23%), home care (33%), foods (28%). This is despite degrowth
in shampoos (-22%) and a moderation in growth for categories like
digestives. We see competitive pressures in segments like shampoos, foods,
hair oils etc. going into FY12. We also note that FY11 growth rates in
international business tapered off to 18% (cf. 30%+ in the past).
Key takeaways from the management concall
a) The company would be focussed on topline/ market shares cf. margins in
FY12; b) management expects a ~10% volume growth in FY12 along with
~5% realisation increase; c) Weighted average price hike of ~1.5% effected
in Apr-11; d) expansion of distribution in rural India is a key focus (pilot in
two states going on); e) no immediate concern on demand – need to watch
for inflation; f) targets to add ~37 stores to end FY12 with 75 stores; would
look to unlock value in future; g) A&P should average at 13-15% in FY12.
19% EPS cagr should sustain valuations
We like Dabur’s diversified portfolio and its herbal platform which gives it
pricing power in the core categories. Current valuations at 24xFY12CL
earnings are in-line with historical average and should sustain in the context
of 19% EPS Cagr over FY11-13CL; maintain Opf.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Growth momentum slowed
Dabur’s 4Q earnings at Rs1.5bn (+10% YoY) – lower than 15% in
9mFY11 - due to higher tax and the middle-east impact. Volume growth
also moderated to 9.3% from 13%. The management plans to focus on
growth in FY12 which may be at the expense of margin but appears to be
a correct strategy in the context of competitive scenario. Current
valuations at 24x FY12 earnings are in-line with historical average and
should sustain in the context of ~20% EPS Cagr over FY11-13CL.
4Q earnings growth below par
Dabur’s 4Q consol. Ebitda grew 27% YoY to Rs2bn (numbers not comparable
due to acquisitions). Like-to-like revenue growth came in at 14% with
underlying volume growth of 9.3%, lowest in the last many quarters;
acquisitions (Hobi, Namaste) added 16ppt to the topline. During FY11 and
4QFY11, the company’s effective tax rate has gone up 3ppts and 6 ppts
respectively due to higher MAT rates and certain one–offs. We expect the
c.20% earnings growth to resume from FY12 onwards.
Mixed performance by different segments
Dabur’s diversified portfolio helped in FY11 as it managed to grow domestic
business by ~15% driven by strong growth in toothpaste (17%),
supplements (23%), home care (33%), foods (28%). This is despite degrowth
in shampoos (-22%) and a moderation in growth for categories like
digestives. We see competitive pressures in segments like shampoos, foods,
hair oils etc. going into FY12. We also note that FY11 growth rates in
international business tapered off to 18% (cf. 30%+ in the past).
Key takeaways from the management concall
a) The company would be focussed on topline/ market shares cf. margins in
FY12; b) management expects a ~10% volume growth in FY12 along with
~5% realisation increase; c) Weighted average price hike of ~1.5% effected
in Apr-11; d) expansion of distribution in rural India is a key focus (pilot in
two states going on); e) no immediate concern on demand – need to watch
for inflation; f) targets to add ~37 stores to end FY12 with 75 stores; would
look to unlock value in future; g) A&P should average at 13-15% in FY12.
19% EPS cagr should sustain valuations
We like Dabur’s diversified portfolio and its herbal platform which gives it
pricing power in the core categories. Current valuations at 24xFY12CL
earnings are in-line with historical average and should sustain in the context
of 19% EPS Cagr over FY11-13CL; maintain Opf.
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