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UBS Investment Research
Dabur India Ltd.
Q 1 FY12 results review
Q1 FY12 revenue up 31%; inorganic growth of 17.8%
Dabur’s Q1 FY12 revenue at Rs12.1bn (+31%YoY) was driven by a +17.8%
contribution from the Darling Group acquisition and 8.6% underlying volume
growth. The consumer care division (CCD) grew 35% (including Darling) and the
consumer healthcare division (CHD) grew 11%. The international business grew
12.5% YoY. EBITDA at Rs1.71bn (UBS-e Rs1.78bn) came in lower due to higher
COGS (52.2% of sales vs. 47.4% in Q1 FY11), while PAT was in line at Rs1.27bn
due to lower interest and depreciation charge (UBS-e Rs1.3bn).
COGS pressure is evident
Dabur’s EBITDA margin declined to 14.2% from 14.9% due to higher COGS.
Ad/sales were reduced to 12.6% from 16.4% to help maintain operating margins.
Segmental margins in CCD declined from 22.8% in Q1 FY11 to 20.2%, and CHD
margins declined from 26% to 24% due to the same pressures. We believe Dabur’s
international business will contribute to earnings growth in future.
Conference call scheduled for 28 July
Management has scheduled a conference call to discuss the results at 4pm on
28 July. Dial in: +91-22- 6629 0317
Valuation: maintain our Neutral rating
We maintain our Neutral rating and our price target of Rs120. 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%.
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.
Q 1 FY12 results review
Q1 FY12 revenue up 31%; inorganic growth of 17.8%
Dabur’s Q1 FY12 revenue at Rs12.1bn (+31%YoY) was driven by a +17.8%
contribution from the Darling Group acquisition and 8.6% underlying volume
growth. The consumer care division (CCD) grew 35% (including Darling) and the
consumer healthcare division (CHD) grew 11%. The international business grew
12.5% YoY. EBITDA at Rs1.71bn (UBS-e Rs1.78bn) came in lower due to higher
COGS (52.2% of sales vs. 47.4% in Q1 FY11), while PAT was in line at Rs1.27bn
due to lower interest and depreciation charge (UBS-e Rs1.3bn).
COGS pressure is evident
Dabur’s EBITDA margin declined to 14.2% from 14.9% due to higher COGS.
Ad/sales were reduced to 12.6% from 16.4% to help maintain operating margins.
Segmental margins in CCD declined from 22.8% in Q1 FY11 to 20.2%, and CHD
margins declined from 26% to 24% due to the same pressures. We believe Dabur’s
international business will contribute to earnings growth in future.
Conference call scheduled for 28 July
Management has scheduled a conference call to discuss the results at 4pm on
28 July. Dial in: +91-22- 6629 0317
Valuation: maintain our Neutral rating
We maintain our Neutral rating and our price target of Rs120. 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%.
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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