Dabur India - International business drives growth.:: Kotak Sec

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Dabur India (DABUR)
Consumer products
International business drives growth. Dabur reported 15% sales growth primarily
led by volumes. Domestic business grew at 13% and the international business
outperformed with 21% sales growth. Proportion of the international business is
increasing which is a significant positive, in our view, as margins are higher. Increased
competitive activity by HUL, P&G and ITC is hurting the shampoo business. We are
cautious on the success of Vatika Almond oil given the high entry barriers.

International business drives sales and margins
Dabur reported consolidated net sales of Rs9.7 bn (+15%, KIE Rs9.9 bn), EBITDA of Rs2 bn
(+16%, KIE Rs2.1 bn) and PAT of Rs1.6 bn (+14%, KIE Rs1.7 bn).
􀁠 Consolidated sales growth of 15% was driven by volume growth of 12% and pricing growth of
3%. Domestic sales grew by 13% but acceleration in international sales growth at 21% aided
overall sales growth.
􀁠 The company has taken a price hike in key brands such as Dabur Amla, Dabur Glucose, Dabur
Chyawanprash etc. (price increases in mid-1QFY11, full impact seen in 2QFY11).
􀁠 Gross margin declined by 210 bps on account of higher raw material cost – edible oil, light
liquid paraffin oil (LLP), copra, and menthol. Savings in adspends in the international business
helped EBITDA margin improve marginally (20 bps) to 20.9%.
􀁠 The consumer care (~75% of sales), foods (~15% of sales) and consumer health (~8% of sales)
division grew by 15%, 16% and 15%, respectively during the quarter.
Category-wise analysis – initial signs of slowdown in hair oil?
􀁠 Hair oil sales grew by ~7% with Dabur Amla growing at ~10%. The company had taken price
hike of ~5% in Dabur Amla to manage input (LLP) cost inflation. To ride on the popular almond
proposition, the company has launched Vatika Almond Hair oil at a price point of Rs42, equal
to Bajaj Almond Drops, the market leader. Marico’s Nihar Almond is priced at Rs27.
􀁠 Shampoo continued to lag behind and reported 14% sales decline which pulled down the
overall hair care sales growth to 2% for the quarter. High competitive intensity and high base
were key reasons for the poor performance of shampoo segment. The company has recently
launched Rs0.5 sachets of its Vatika brand to market it in the rural areas.