DABUR INDIA LTD - indianotes-live-04da772e042e45f4b8c979 ... · DABUR INDIA LTD -...

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DABUR INDIA LTDResult Update (CONSOLIDATED BASIS): Q3 FY19

CMP: 451.80 FEB 2nd, 2019

Overweight ISIN:INE016A01026

Index Details SYNOPSISDabur India Limited is one of the worlds largestAyurvedic and Natural Health Care Company.

Consolidated net profit registered a growth of 10.26%and stood at Rs. 3672.10 mn in the current quarter asagainst Rs. 3330.30 mn in the corresponding period ofthe previous year.

Consolidated revenue for the 3rd quarter stood at Rs.21992.10 mn from Rs. 19664.40 mn in thecorresponding period of the previous year, up by11.84%.

During Q3 FY19, consolidated EBIDTA was Rs.5206.40 mn as against Rs. 4698.10 mn in thecorresponding period of the previous year.

Consolidated PBT of the company for Q3 FY19registered a growth of 10.31% at Rs. 4590.50 mn asagainst Rs. 4161.50 mn in the Q3 FY18.

Revenue of the company registered at Rs. 64048.60mn in 9M FY19 as against Rs. 57154.30 mn in 9MFY18, up by 12.06%.

During 9M FY19, PAT rose by 11.89% at Rs.10747.30 mn as compared to Rs. 9605.60 mn in 9MFY18.

Domestic business revenue grew by 15.2% led byvolume growth of 12.4%

Growth in International Business was impacted bycontinued under performance of MENA markets andadverse currency movement.

Contribution of Domestic FMCG increased to 72.2%from 70.2% last year.

International Business contributed 25.0% as comparedto 27.1% last year.

Net Sales and PAT of the company are expected togrow at a CAGR of 7% and 8% over 2017 to 2020E,respectively.

Stock DataSector Personal ProductsBSE Code 500096Face Value 1.0052wk. High / Low (Rs.) 490.70/312.45Volume (2wk. Avg.) 203000Market Cap (Rs. in mn.) 798014.34

Annual Estimated Results(A*: Actual / E*: Estimated)Years(Rs in mn) FY18A FY19E FY20ENet Sales 77483.40 86700.46 94503.50EBITDA 19226.20 20777.48 22864.92Net Profit 13722.80 14770.65 16280.83EPS 7.79 8.36 9.22P/E 57.99 54.03 49.02

Shareholding Pattern (%)

As on Dec 2018 As on Sep 2018

Promoter 67.89 67.88

Public 32.11 32.12

Others -- --

1 Year Comparative Graph

DABUR INDIA LTD S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E(X)(TTM) P/BV(X) DIVIDENDCompany Name (Rs.) Rs. In mn. (Rs.) Ratio Ratio (%)

Dabur India Ltd 451.80 798014.34 8.34 54.17 13.95 750.00Hindustan Unilever Ltd 1796.25 3888250.70 27.02 66.48 54.95 2000.00Godrej Consumer Products Ltd 714.35 730184.40 19.80 36.08 11.67 1200.00Marico Ltd 376.20 485623.20 6.75 55.73 19.00 425.00


QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)

Results updates- Q3 FY19,

(Rs in millions) Dec-18 Dec-17 % Change

Revenue 21992.10 19664.40 11.84%

Net Profit 3672.10 3330.30 10.26%

EPS 2.08 1.89 9.96%

PBIDT 5206.40 4698.10 10.82%

The consolidated net profit registered a growth of 10.26% and stood at Rs. 3672.10 million in the current quarter as

against Rs. 3330.30 million in the corresponding period of the previous year. Revenue for the 3rd quarter stood at Rs.

21992.10 million from Rs. 19664.40 million, up by 11.84% when compared with the prior year period. Reported earnings

per share of the company stood at Rs. 2.08 a share in the third quarter as compared to Rs. 1.89 per share in the

corresponding previous quarter. Profit before interest, depreciation and tax is Rs. 5206.40 million as against Rs. 4698.10

million in the corresponding period of the previous year, up by 10.82%.

Break up of Expenditure

Break up ofExpenditure

Value in Rs. Million

Q3 FY19 Q3 FY18 %Change

Cost of MaterialsConsumed ( includeExcise Duty)

8447.80 8049.00 5%

Purchase of Stock inTrade 1981.40 2397.80 -17%

Employee BenefitsExpense 2375.90 2048.30 16%

Depreciation &Amortization Expense 448.50 404.50 11%

Advertisement andPublicity 1780.70 1853.20 -4%

Others 2228.70 2204.70 1%


Segment Revenue:

Q3 FY19 – Overview:

Domestic business revenue grew by 15.2% led by volume growth of 12.4%

Growth in International Business was impacted by continued under performance of MENA markets and adverse

currency movement.

Contribution of Domestic FMCG increased to 72.2% from 70.2% last year

International Business contributed 25.0% as compared to 27.1% last year

Domestic FMCG – Category-wise Sales:

Category Highlights:

Home and Personal Care (HPC) – Q3 FY19:

HPC posted growth of 16.3% in Q3 FY19

Oral care recorded growth of 10.0% with toothpastes growing at 11.1%

Red Toothpaste Franchise continued its growth momentum with RTP growing by 22.6%


Babool was impacted by high competitive intensity at economy price points

Hair oil category grew by 23.6% with all round growth in all brands and gain in market share

Shampoos category reported strong growth of 25.2% led by on ground activations and visibility drive

Homecare category posted growth of 8.9% with strong growth in Sanifresh

Skin care recorded growth of 19.3% driven by strong double digit growth in Gulabari and good performance of bleach

portfolio

Healthcare (HC) – Q3 FY19:

Healthcare grew by 15.9% in Q3 FY19

Health Supplements recorded growth of 13.8% on the back of double digit growth in Chyawanprash and Honey

Chyawanprash grew by 10.0%

Dabur Honey grew by 19.8%

Digestives posted growth of 22.5% driven by continued strong performance of Hajmola tablets and Pudin Hara

OTC category grew by 17.7% on the back of good growth in Lal Tail, Honitus and Shilajit

Ethicals portfolio grew by 17.4% driven by strong growth across product categories

Foods– Q3 FY19:

Beverages grew by 11.5%

Ethnic Masala range performed well – launch in MT showing good traction; being rolled out to GT

Activ Coconut Water continues on its strong growth trajectory

New variants of juices to be launched in coming season

Market share at peak level of around 56% – a gain of ~300 bps over the same quarter last year

Latest Launches:

The company launched Soya-Protein enriched Almond Hair Oil in Q3 FY19.

The company launched Gulabari – Soft and Rosy in Q3 FY19.

The company launched Dabur Chyawanprash Sugarfree for Diabetic Persons.

The company launched various recepie pastes under name “Homemade”.

The company launched Brahmi Amla Oil in 40 ml Bottle.

The company lauched “Honitus Madhvani” paste which is specific for Caugh and Cold People.

The company also lauched Dabur Chyawanprash which is for Immunity for all.


International Business – Q3 FY19:

International Business reported 3.4% growth with constant currency growth of around 1%

Egypt business was under pressure on account of hyper inflation and liquidity issues

SAARC grew by 11% on the back of strong growth in Pakistan and Bangladesh

Hobby had a strong quarter, growing by 31% in constant currency terms; however currency devaluation impacted in

translation

GCC markets declined by 12% due to consumption pressure and sharp decline in categories

Namaste business reported double digit growth in SSA & North America but was brought down by EU & Middle

East.

COMPANY PROFILE

Dabur India Limited is one of India's leading FMCG Companies. Building on a legacy of quality and experience for 135

years, Dabur is today India's most trusted name and one of the world's largest Ayurvedic and Natural Health Care

Company. Dabur India's FMCG portfolio today includes five flagship brands with distinct brand identities - Dabur as the

master brand for natural healthcare products, Vatika for premium personal care, Hajmola for digestives. Real for fruit-

based beverages, and Fern for fairness bleaches & skin care.


FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)Balance Sheet as of March 31, 2017 -2020E

FY17A FY18A FY19E FY20EASSETSNon-Current Assets

a) Property, plant and Equipment 14790.20 15521.00 16607.47 17603.92b) Capital Work in Progress 421.00 415.10 435.86 462.01c) Investment Property 549.90 541.60 563.26 591.43d) Goodwill 4105.30 4115.40 4362.32 4580.44e) Other Intangible Assets 138.60 103.10 87.64 78.87f) Financial Assets

i) Investments 24994.10 30917.80 37101.36 44150.62ii) Loans 118.60 131.40 107.75 91.59iii) Others 63.80 41.10 33.70 28.65

g) Non-Current Tax Assets 33.10 33.30 34.97 36.36h) Other Non-Current Assets 963.10 799.00 878.90 949.21

1. Sub - Total Non- Current Assets 46177.70 52618.80 60213.22 68573.09Current Assets

a) Inventories 11067.10 12561.80 13817.98 14923.42b) Financial Assets

i) Investments 7407.50 7133.90 6919.88 6781.49ii) Trade Receivables 6504.20 7060.80 7625.66 8311.97iii) Cash and Cash Equivalents 1632.20 1538.00 1461.10 1417.27iv) Bank Balance other than Cash Equivalents 1415.90 1522.60 1629.18 1726.93v) Loans 38.00 348.80 551.10 870.74vi) Others 381.20 282.70 231.81 190.09

c) Current Tax Assets (Net) 0.00 19.60 20.58 21.40d) Other Current Assets 2698.60 3910.10 5004.93 6256.16e) Assets Held for Sale 0.00 19.20 20.16 0.00

2. Sub - Total Current Assets 31144.70 34397.50 37282.40 40499.47Total Assets (1+2) 77322.40 87016.30 97495.62 109072.56EQUITY AND LIABILITIESEQUITY

a) Equity Share Capital 1761.50 1761.50 1761.50 1761.50b) Other Equity 46712.40 55303.70 64152.29 73775.14c) Non-Controlling Interest 247.70 265.30 278.57 289.71

1. Total Equity 48721.60 57330.50 66192.36 75826.34Non Current Liabilities

a) Financial Liabilitiesi) Borrowings 4703.90 3643.40 3279.06 3016.74ii) Other Financial Liabilities 37.10 42.50 46.75 49.09

b) Provisions 534.00 565.00 593.25 616.98c) Deferred Tax Liabilities (Net) 1080.40 1090.50 1145.03 1190.83

2. Sub - Total Non Current Liabilities 6355.40 5341.40 5064.09 4873.63Current Liabilities

a) Financial Liabilitiesi) Borrowings 4403.30 4644.90 4784.25 4975.62ii) Trade Payables 13100.30 14103.20 14827.50 15635.40iii) Other Financial Liabilities 1746.90 2382.00 3144.24 4087.51

b) Other Current Liabilities 1691.00 1730.30 1816.82 1871.32c) Provisions 918.90 1074.70 1235.91 1359.50d) Current Tax Liabilities (Net) 385.00 409.30 425.67 438.44

3. Sub - Total Current Liabilities 22245.40 24344.40 26234.38 28367.79Total Equity and Liabilities (1+2+3) 77322.40 87016.30 97495.62 109072.56


Annual Profit & Loss Statement for the period of 2017 to 2020E

Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Description 12m 12m 12m 12mNet Sales 77014.40 77483.40 86700.46 94503.50Other Income 2983.50 3051.80 3015.98 3227.09Total Income 79997.90 80535.20 89716.44 97730.60Expenditure -61925.00 -61309.00 -68938.96 -74865.68Operating Profit 18072.90 19226.20 20777.48 22864.92Interest -540.30 -530.50 -647.57 -725.28Gross Profit 17532.60 18695.70 20129.91 22139.64Depreciation -1428.60 -1621.80 -1782.21 -1978.25Profit Before Tax 16104.00 17073.90 18347.70 20161.39Tax -3303.40 -3353.50 -3591.05 -3893.16Profit After Tax 12800.60 13720.40 14756.65 16268.23Share of Profit & Loss Assoc 2.50 2.40 14.00 12.60Net Profit 12803.10 13722.80 14770.65 16280.83Equity Capital 1761.50 1761.50 1766.30 1766.30Reserves 46712.40 55303.70 64152.29 73775.14Face value 1.00 1.00 1.00 1.00EPS 7.27 7.79 8.36 9.22

Quarterly Profit & Loss Statement for the period of 30th June, 2018 to 31st Mar, 2019E

Value(Rs.in.mn) 30-June-18 30-Sep-18 31-Dec-18 31-Mar-19E

Description 3m 3m 3m 3mNet sales 20806.80 21249.70 21992.10 22651.86Other Income 736.50 812.10 752.50 714.88

Total Income 21543.30 22061.80 22744.60 23366.74

Expenditure -16945.60 -16741.40 -17538.20 -17713.76

Operating profit 4597.70 5320.40 5206.40 5652.98Interest -148.80 -155.60 -167.40 -175.77

Gross profit 4448.90 5164.80 5039.00 5477.21

Depreciation -427.30 -431.00 -448.50 -475.41

Profit Before Tax 4021.60 4733.80 4590.50 5001.80

Tax -723.80 -961.30 -923.60 -982.35

Profit After Tax 3297.80 3772.50 3666.90 4019.45Share of Profit & Loss of Assoc 2.20 2.70 5.20 3.90

Net Profit 3300.00 3775.20 3672.10 4023.35Equity Capital 1766.30 1766.30 1766.30 1766.30

Face Value 1.00 1.00 1.00 1.00

EPS 1.87 2.14 2.08 2.28


Ratio Analysis

Particulars FY17A FY18A FY19E FY20E

EPS (Rs.) 7.27 7.79 8.36 9.22EBITDA Margin (%) 23.47% 24.81% 23.96% 24.19%PBT Margin (%) 20.91% 22.04% 21.16% 21.33%PAT Margin (%) 16.62% 17.71% 17.02% 17.21%P/E Ratio (x) 62.16 57.99 54.03 49.02ROE (%) 26.41% 24.04% 22.39% 21.54%ROCE (%) 28.91% 26.94% 25.68% 25.00%Debt Equity Ratio 0.19 0.15 0.12 0.11EV/EBITDA (x) 43.96 41.29 38.31 34.82Book Value (Rs.) 27.52 32.40 37.32 42.77P/BV 16.42 13.95 12.11 10.56

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 451.80, the stock P/E ratio is at 54.03 x FY19E and 49.02 x FY20E respectively.

Earning per share (EPS) of the company for the earnings for FY19E and FY20E are seen at Rs. 8.36 and Rs. 9.22,

respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 8% over 2017 to 2020E, respectively.

On the basis of EV/EBITDA, the stock trades at 38.31 x for FY19E and 34.82 x for FY20E.

Price to Book Value of the stock is expected to be at 12.11 x and 10.56 x for FY19E and FY20E respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

Fast moving consumer goods (FMCG) is the 4th largest sector in the Indian economy. There are three main segments in

the sector – Food and Beverages, Healthcare and Household and Personal Care. The FMCG sector has grown from $31.6

billion in 2011 to $49 billion in 2016, according to India Brand Equity Foundation (IBEF) report on the FMCG industry.

Growing incomes, favourable demographics, easier access and changing lifestyles are the key growth drivers for the

consumer market. The FMCG industry is expected to reap the benefits of the government’s renewed focus on agriculture,

education, healthcare, infrastructure and employment in its Union Budget 2018-19. These initiatives are expected to

increase the disposable income in the hands of the common man, especially in the rural areas, which will be beneficial for

the sector.

The recent years have seen the emergence of a significant trend in the Indian consumer market: growing preference for

herbal and Ayurvedic products. The herbal or natural wave has been gaining traction in India, driven by resurgent pride

among the youth on Indian culture and Indian products. They have been showing greater willingness to embrace products


that offer the tried-and-tested benefits of traditional Ayurveda, but presented in modern day and contemporary formats.

This trend has been gaining traction across the categories with leading MNCs also joining the bandwagon.

Companies with traditional herbal positioning and strong R&D are more likely to benefit disproportionately from this

trend. As the leading player in the Ayurveda and natural health and personal care market, Dabur has been working

towards making traditional Indian knowledge available in a form that appeals to the modern consumer.

India FMCG Business:

The India FMCG business includes the Consumer Care Business comprising key categories like Health Care

(encompassing Health Supplements, Digestives, OTC and Ethicals), Home & Personal Care (comprising Hair Care, Oral

Care, Skin Care and Home Care) and Foods. The company has a wide distribution network, covering over 6.3 million

retail outlets with a high penetration in both urban and rural markets. The India FMCG business, despite the strong

headwinds in the form of pre-GST jitters reported 8.1% growth during fiscal 2017-18.

Health Care:

Ayurveda-based products have been gaining traction in India over the past few years on account of rising awareness about

harmful effects of chemicals and allopathic medicines, coupled with increasing number of product innovations by

companies. The pace of growth is expected to continue in years to come with a growing number of young people

beginning to embrace this traditional medicine.

According to a TechSci Research report, “India Ayurvedic Products Market Forecast & Opportunities, 2011-2021”, the

Ayurvedic products market in India is projected to register a CAGR of 16% between 2016 and 2021. It says that the rising

health concerns and awareness of side-effects of allopathy are some of the major factors driving consumer preference for

Ayurvedic products in the country.

The Government has also been making concerted efforts towards encouraging and promoting usage of Ayurvedic

products through education and national awareness programmes. Various initiatives like celebration of the National

Ayurveda Day, seminars, conclaves and programmes for prevention and control of Diabetes and Non-Communicable

Diseases has increased awareness about this system of medicine among people.

As the country’s leading Science-based Ayurveda expert, Dabur has been at the forefront on carrying out collaborative

research and modern technology to further establish the benefits of various traditional Ayurvedic formulations, products

and ingredients. The Company constantly investing in not just updating and upgrading its Health Care portfolio, but also

towards making it more contemporary and in sync with the ever-changing needs and aspirations of the modernday

consumer. All this is being done while keeping the core of Ayurveda intact. The Dabur Research & Development Centre

(DRDC) has been undertaking, coordinating and promoting research on scientific lines in Ayurvedic Sciences. This

research work is executed by an able team of over 100 scientists and also through collaborative studies with various

universities, hospitals, research institutes and government bodies.

Dabur’s Health Care vertical today comprises Health Supplements, Digestives, Over-The-Counter (OTC) and Ayurvedic

Ethical products. This vertical contributed 31.7% to the India FMCG sales in 2017-18.


Home & Personal Care:

Led by a widespread lifestyle shift, triggered mainly by environmental awareness, millennial trends and growing

awareness about health and wellness, many of today’s consumers are demanding natural or nature-based products in

categories such as personal care, household care and cosmetics. A survey carried out by Euro monitor International

reveals that over half of Indian consumers reported that ‘natural or organic’ features are known to influence their hair and

skin care purchase decisions. About 71% of consumers surveyed said that they would pick up a face cream or lotion

provided it claimed to be ‘natural’, while 38% said they would buy a shampoo or hair oil, if it was made with ‘botanical’

ingredients.

These points towards a growing across-the-board trend among Indian consumers for natural ingredients in personal care

products and an affinity and innate belief in the goodness of ancient Indian wisdom. For over a century, Dabur has been

offering consumers natural and Ayurveda-based personal care solutions. Dabur offers a range of product covering Hair

Care, Oral Care, Skin Care & Salon and Home Care. This vertical contributed 50.4% to the India FMCG sales.

Foods:

Dabur’s Foods business largely comprises packaged fruit juices & beverages with culinary pastes forming a small part of

the business. This business contributed 18.0% to the India FMCG Business. This business reported moderate growth

during 2017-18 as the category witnessed increased competitive intensity and increase in number of players at the

economy end of the market. Dabur is the pioneer in packaged fruit juice market in India and enjoys nearly 55% share of

the category with a range of products under the brands Real and Real Activ. With the widest and healthiest product range

in the industry, constant innovation and unwavering focus on quality, Dabur has maintained its lead despite the entry of

new players offering lower priced and discounted products.

The company increased its media spends and focused on enhancing its distribution footprint and penetration. During the

festive season, Real introduced an exclusive range of 13 specially crafted gift packs of Real fruit beverages, offering

consumers the option of gifting real health to their near and dear ones. The range has been eloquently designed to

communicate the goodness of fruits and the concept of ‘Festive Wishes of Good Health’.

Special utility pack options were also part of the offering, keeping up with the theme of offering consumers new, healthy

gifting options. These packs were well received by consumers. Gift packs of Real fruit juices are also available during

other festive seasons such as Rakhi, Eid and Christmas.

As part of its theme of offering ‘Health and Wellness’ the division had launched Active Coconut Water couple of years

ago. The brand saw strong growth this year supported by preference for natural beverages which offer nutrition in addition

to quenching thirst. The Mausambi juice variant which was launched last year received a good response and gained

saliency in the portfolio.

Retail Business – NewU:

Dabur operates in the specialized beauty retail business with its wholly-owned subsidiary, H&B Stores Ltd. This is a

chain of beauty retail stores under the brand ‘NewU’, offering a wide range of beauty care products covering cosmetics,


fragrances, skin care, personal care and beauty and fashion accessories. NewU is today amongst the largest one-stop shop

for all beauty care needs with a range of domestic and exclusive international brands available at its stores.

Outlook:

The FMCG industry in India faced stress at the beginning of the fiscal year due to the implementation of GST but

recovered considerably in the later part of the year. That said, implementation of GST in India is a big positive for the

FMCG sector as it has enabled a unified tax structure, easier movement of goods across the country, conversion from

unorganized to organized sector and streamlining of tax structure across categories. While there are some near-term

inflationary pressures and challenges due to the increase in prices of crude oil and other raw materials, overall consumer

demand is resilient and the consumer industry is expected to grow at a good pace in the medium to long term.

Increasing preference for natural products, rising incomes and aspirations, low penetration of most of the categories and

changing lifestyle will be the drivers for the FMCG sector. Company, with its brands, infrastructure, capabilities and

management depth is well placed to leverage this opportunity. The Company has a strong product pipeline and has also

been aggressively investing in various communication and distribution initiatives to create and efficiently service demand

for its products.

International markets witnessed recovery after the slowdown on the back of low crude prices in the past few years.

Adverse currency movements in some markets like Egypt, Nigeria and Turkey impacted the company’s consolidated sales

growth although these markets have grown well in local currency terms. The translation impact is likely to reduce in fiscal

2018-19 as the currency depreciation has come into the base. Outlook for African markets remains positive. SAARC

region has been stable and performed well. The outlook for this region remains positive for the next fiscal.


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The information and opinions in Firstcall Research was prepared by our analysts and it does not constitute an offer orsolicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an officialconfirmation of any transaction. The information contained herein is from publicly available secondary sources and dataor other secondary sources believed to be reliable but we do not represent that it is accurate or complete and it should notbe relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damagethat may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document.

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The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best oftheir knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Theanalyst qualifications, sectors covered and their exposure if any are tabulated hereunder:

Name of the Analyst Qualifications SectorsCovered

Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport

Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)

Pharma &Diversified

No Interest/ Exposure

U. Janaki Rao M.B.A CapitalGoods


B. Anil Kumar M.B.A Auto, IT &FMCG


V. Harini Priya M.B.A Diversified No Interest/ Exposure

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