Microsoft word - mangal keshav_dabur_update_290110.doc
Yet another quarter of robust performance
Analyst | Shishir Manuj | Tel : +91-22-67103043 | [email protected]
Dabur reported strong volume-led numbers in line with our estimates. Despite softening in demand observed by most players,
Dabur reported broadbased growth. With strong performance improvement in FemCare, management reinforced its acquisitions
management track. Margins improved sharply despite spurt in marketing spend. We like the company for its wide portfolio, strong management and growth focus. We find the stock attractively priced and reiterate our BUY. Dabur is our top FMCG pick.
Revenue grew 19% with 14% underlying volume growth.
Except some slackness in hair and home care, most other
segments reported strong growth. Translation losses during
the quarter pulled down reported growth.
555bps yoy decline in GM offset sharp jump in A&P ratio
driving OPM up 235bps to 19.5%. Operating profits were up
35%. Management does not see pressure on gross margins
for the near-term. We see OPM holding up for some time, as
A&P ratio leaves sufficient legroom to manage margins.
While high food prices are being cited by most managements
as hurting demand, we are pretty comfortable with Dabur’s
current volume growth. However, value growth will turn down
in absence of any major product inflation. The launch pipeline
We like the sharp improvement in FemCare OPM (18.5% vs
12.7%), as management stays focuses on investing behind
fewer brands and not trying too many things.
Stock is trading at 23.6x EPS and 18.8x EV/EBITDA on
1-year rolling forward basis. We find valuations attractive for
20% 2-yr EPS CAGR, and much lower risk to growth. We
reiterate our BUY call with a target price of Rs 186.
Source :Company, Bloomberg, Mangal Keshav Research Estimates Source: Company, Mangal Keshav Research Estimates
Mangal Keshav Securities Ltd. 301A-304, Kotia Nirman, Andheri (W), Mumbai – 400 053.
Source: Company, Mangal Keshav Research Estimates
Oral care surprised positively, hair care negatively:
We are quite surprised by the strong growth in oral care led
by toothpaste. This comes on the back of very sedate
Dabur’s strong 18.8% revenue growth was driven by 14%
growth in the last few quarters. We are raising our
underlying volume growth. Both domestic and international
estimates for oral care growth. However, hair care
growth remained strong, although currency translation
disappointed us. While hair oil was facing a strong base
and did not witness price growth, anti-dandruff shampoos
pulled down overall shampoos growth. We believe we will
Sales growth backed up by high volume growth
see some improvement going ahead as the company rolls out new extension nationally.
International revenue growth was a little weaker compared
to recent history, a part of which is explained by the
strengthening Rs/USD. We had anyways estimated for a
lower growth for the medium-term accounting for the increased size of the business.
Source: Company, Mangal Keshav Research
Volume growth consistent at higher levels
12.0 Overall sales growth hurt by deferral of
15.0 institutional sales. Company gained
30.4 performed well. Toothpowder managed
49.1 to stay flat, despite declining category.
25.0 Burrst to be launched nationally next
Source: Company, Mangal Keshav Research Source: Company, Mangal Keshav Research
Dabur gained market share in most key categories.
Source: Company, Mangal Keshav Research Source: Company, Mangal Keshav Research; some data points have been restated
helped deliver this improvement. Management continues to focus on the bleaching and depilatory products.
OPM expanded 234bps driven by 555bps yoy lower
material cost, despite hardly any product price hike taken.
Recurring EPS grows 27%: Operating profits grew 34.8%
Management indicated that they are adequately covered
yoy driving up recurring EPS by 27% to Rs1.59. This was
for the next quarter, although they were tentative for the
despite a lower other income and higher effective tax rate
year ahead. We see some input inflation build up, but this
is likely to be more muted than most other FMCG
Tweaking up estimates: Although the results are in line with
companies due to the spread of inputs. We believe current
our estimates, we are raising our estimates to account for
OPM levels are sustainable over the next few quarters, as
little slower revenue growth and higher gross margins.
management has got back pricing power after no price
hikes in the last few quarters. Besides, Q3FY10 saw 54%
yoy higher A&P spend. While management believes A&P
base ratios have moved up to around 13%, we believe this
still allows management to leverage when under margin
Source: Mangal Keshav Research Estimates Source: Bloomberg, Mangal Keshav Research Estimates Source: Company, Mangal Keshav Research.
The stock is trading at 23.6x EPS and 18.8x EV/EBITDA on
a 1-year forward basis. We find the valuations attractive
based on the 20% EPS CAGR over FY10E-FY12E. We also
see lower risk to growth compared to most other FMCG
peers due to the diversified product and raw material
portfolio and lower head-on competitiveness.
Source: Company, Mangal Keshav Research Estimates Source: Company, Mangal Keshav Research.
Femcare witnessing sharp improvement: We are quite
impressed by the c.600bps improvement in FemCare’s
OPM to 18.5% besides a strong growth that it has reported.
Tighter cost control and better leverage benefits have
Source: Company, Mangal Keshav Research Estimates
Institutional Sales / Trading Desk Roshan Shah
Disclaimer: 2006 Mangal Keshav Securities Ltd. All rights reserved
This Report has been prepared by Mangal Keshav Securities Limited (MKSL) This Report is meant solely for use by the recipient and is not for circulation. This Report does not constitute a personal recommendation or take into account the
particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this Report, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this Report and the income from them may go down as well as up, and investors may realise losses on any investments. Past performance is not a guide for future
performance. MKSL does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding taxation aspects of any
potential investment. This Report is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied
upon as such. Opinions expressed are our current opinions as of the date appearing on this Report. This Report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MKSL to any registration or licensing requirement within such jurisdiction. If this Report is inadvertently sent or has
reached any individual in such country, the same shall be ignored and it shall be brought to the attention of the sender. This Report may not be reproduced, distributed
or published in any form for any purposes with out prior written approval of MKSL. We and our affiliates, group companies, directors, officers and employees may (a) from time to time have long or short positions in, and buy or sell the securities of company (ies) mentioned herein or (b) be engaged in any other transaction involving
such securities and earn brokerage or other compensation or (c) act as advisor or lender/borrower to such company (ies) or (d) have other potential conflict of interest
with respect to any recommendation and related information and opinions. MKSL, its directors, officers, analysts or employees do not take any responsibility, financial or otherwise, for any losses or damages that may be sustained due to the investments made or any action taken on the basis of this Report, including but not restricted
to, fluctuation in the prices of securities, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income etc. While all efforts have been
taken to check the accuracy of the information provided herein, we do not warrant that is free from any technical inaccuracies or typographical errors. Mangal Keshav
Securities Ltd. shall not be liable for damages of any kind arising out of or in connection with the use of the information in this publication.
501, Heritage Plaza, J. P. Road, Opp. Indian Oil Colony, Andheri - (W), Mumbai - 400 053.
301A-304A, Kotia Nirman, Opp. Laxmi Industrial Estate, New Link Road, Andheri (W), Mumbai - 400 053.
Cameroon is located on the West Central -African coast. It is bordered by Nigeria (to the West), Chad (to the North), Central African Republic (to the east) , Congo, Gabon, and Equatorial Guinea (to the South). It is a form of unitary and decentralized nation state; made up of a number of circumscriptions: 10 provinces divided into 56 divisions and further divided into 149+ subdivisions/districts