07 May 2011

UBS :: Dabur India - Building a supplements business

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UBS Investment Research
Dabur India Ltd.
Building a supplements business
 
„ News: Dabur buys 30-Plus
Dabur is to acquire Ajanta Pharma’s energizer brand ‘30-Plus’, the oldest herbal
energizer brand in the country. It was launched in 1990. According to media
reports, the brand consideration is ~Rs500m.

„ Acquisition to augment the dietary supplements business
Dabur launched NutriGo, a health supplement which aids nutrition and antioxidant requirements. Ajanta’s 30-Plus enjoys good brand recall and we believe it
should add to the nutrition supplement business that Dabur wants to build. Dabur
also plans to launch products for pain management and gastro problems.
„ Focus on OTC business
MNCs believe India is the next consumer acquisition geography and we expect the
personal care business to witness higher media spends. We believe this will make
market share acquisition in Consumer Care tougher for Dabur. We believe the
company will focus more on its CHD (Healthcare), OTC, and international
businesses in the next 2-3 years.
„ Valuation: maintain Neutral rating, price target of Rs110
We continue to maintain a Neutral rating on the stock with a price target of Rs110.
Our price target is derived from a DCF-based methodology and we 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%.


Q 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).
Q 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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