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Dabur India Limited Neutral
DABU.BO, DABUR IN
Subdued volume growth and weak gross margins lead
to disappointing operating performance
Dabur reported disappointing performance for its domestic operations
registering Sales, EBITDA and PAT growth of 13%, 5% and 2% respectively
during Q1FY12. Consolidation of Namaste and Hobi led to consolidated sales,
EBITDA and PAT growth of 31%, 25% and 20% respectively. Ex- these
recent acquisitions sales growth was still subdued at 13.8%. Apart from
subdued volume growth (8.6% for organic business), sharp decline in gross
margins was a key negative. Though company limited EBITDA margin
erosion by cutting down on advertising and promotional spends in a
significant manner, this does not bode well for future revenue growth and
sustainable margins. At 29x FY12E and 25x FY13E P/E, valuations are
unsupportive. Stay Neutral.
Domestic volume growth moderates to 7.2% during the qtr with moderation
in growth rates for health supplements and hair oils. Domestic price/mix
growth was c5.8%. International division (ex-Hobi and Namaste) registered
subdued sales growth of 12% impacted negatively by weak offtake in Nepal,
Libya, Yemen & Syria and currency translational losses (c2% -ve impact).
Sharp decline in gross margins weigh on operating margins despite lower
A&P spends. Consolidated gross margins fell 480bp y/y and EBITDA
margin decline was restricted to 70bp y/y as A&P/Sales ratio reduced 390bp
y/y. For domestic business, A&P spends declined 17% y/y, helping to offset
590bpy/y gross margin erosion to some extent, as a result EBITDA margin for
domestic business declined 110bp y/y.
Category sales performance: Negative surprise for health supplements &
CHD and shampoos; Foods, Oral Care and home care fare better – 1)
Hair care segment grew 9% y/y with hair oils growing 16% (supported by
aggressive price hikes of 12-13%) and shampoo sales registering decline of
19% y/y, 2) Oral care saw revenue growth of 13% with toothpaste sales
growth at 14%, 3) Health supplements registered flat revenue growth y/y on
account of moderate growth for Chyawanprash and marginal decline for
Glucose (weak summer) , 4) Sales for digestives category were subdued at 8%,
5) Skin care sales grew 16% y/y led by Fem portfolio, 5) Home care sales
continued the strong growth momentum with growth of 25% y/y, 6) CHD sales
growth was disappoitning 11% with slower growth for OTC products, and 7)
Foods division registered strong volume led 31.5% y/y sales growth
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dabur India Limited Neutral
DABU.BO, DABUR IN
Subdued volume growth and weak gross margins lead
to disappointing operating performance
Dabur reported disappointing performance for its domestic operations
registering Sales, EBITDA and PAT growth of 13%, 5% and 2% respectively
during Q1FY12. Consolidation of Namaste and Hobi led to consolidated sales,
EBITDA and PAT growth of 31%, 25% and 20% respectively. Ex- these
recent acquisitions sales growth was still subdued at 13.8%. Apart from
subdued volume growth (8.6% for organic business), sharp decline in gross
margins was a key negative. Though company limited EBITDA margin
erosion by cutting down on advertising and promotional spends in a
significant manner, this does not bode well for future revenue growth and
sustainable margins. At 29x FY12E and 25x FY13E P/E, valuations are
unsupportive. Stay Neutral.
Domestic volume growth moderates to 7.2% during the qtr with moderation
in growth rates for health supplements and hair oils. Domestic price/mix
growth was c5.8%. International division (ex-Hobi and Namaste) registered
subdued sales growth of 12% impacted negatively by weak offtake in Nepal,
Libya, Yemen & Syria and currency translational losses (c2% -ve impact).
Sharp decline in gross margins weigh on operating margins despite lower
A&P spends. Consolidated gross margins fell 480bp y/y and EBITDA
margin decline was restricted to 70bp y/y as A&P/Sales ratio reduced 390bp
y/y. For domestic business, A&P spends declined 17% y/y, helping to offset
590bpy/y gross margin erosion to some extent, as a result EBITDA margin for
domestic business declined 110bp y/y.
Category sales performance: Negative surprise for health supplements &
CHD and shampoos; Foods, Oral Care and home care fare better – 1)
Hair care segment grew 9% y/y with hair oils growing 16% (supported by
aggressive price hikes of 12-13%) and shampoo sales registering decline of
19% y/y, 2) Oral care saw revenue growth of 13% with toothpaste sales
growth at 14%, 3) Health supplements registered flat revenue growth y/y on
account of moderate growth for Chyawanprash and marginal decline for
Glucose (weak summer) , 4) Sales for digestives category were subdued at 8%,
5) Skin care sales grew 16% y/y led by Fem portfolio, 5) Home care sales
continued the strong growth momentum with growth of 25% y/y, 6) CHD sales
growth was disappoitning 11% with slower growth for OTC products, and 7)
Foods division registered strong volume led 31.5% y/y sales growth
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