2 May 2012
4QFY12 Results Update | Sector: Consumer
Dabur India
BSE SENSEX
S&P CNX
17,319
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
5,248
DABUR IN
1,740.7
122/92
5/13/20
195.0
3.7
CMP: INR112
TP: INR104
Neutral
Dabur India (DABUR) reported better than expected results for 4QFY12. Adjusted PAT grew 16% to INR1.7b
(v/s our estimate of INR1.56b), led by lower interest and lower tax rates. Sales growth was 23%, higher than
our estimate, led by strong recovery in both domestic and international markets - volumes increased 12.4%.
Gross margin contracted 320bp to 49.8%, as steep inflation and lag in price increases continued to impact
profitability.
EBITDA margin declined 276bp to 15.8% owing to higher ad expenses (up 190bp). EBITDA grew just 1.9% to
INR2,153m (v/s our estimate of INR2,105m). Interest cost declined 64% due to INR70m forex gain during
4QFY12. A 26% increase in other income and lower tax rate (down 390bp) boosted PAT by 16% to INR1,705m
(v/s our estimate of INR1,567m).
The management had indicated volume growth focus in the previous quarter and the company has been able
to achieve that. We note that Dabur has been slow in raising prices and this has impacted margins. The
management is contemplating increasing prices gradually to recover profit margins.
Dabur is expanding its rural distribution meaningfully. This will enable it to grow faster than the market and
to increase its market share even if rural growth slows down.
We expect higher growth in international business, as the GCC region recovers; the success of Namaste
products in Africa will hold the key to any meaningful increase in growth rates, in our view. We marginally
tweak our estimates by factoring in 100bp lower tax rate and INR1b capex in Sri Lanka. We estimate 18.7% PAT
CAGR over FY12-14.
The stock trades at 25.7x FY13E EPS of INR4.4 and 21.5x FY14E EPS of INR5.2. Maintain
Neutral.
Amnish Aggarwal
(AmnishAggarwal@MotilalOswal.com); +9122 39825404

Dabur India
Consolidated volumes up 12.4%; standalone volumes grow 9.5%
Domestic sales grew 19.2% to INR9.7b. Gross margin contracted 300bp to 46.2%
and EBITDA margin declined 500bp to 16.3% due to 160bp increase in ad spends
and 120bp increase in other expenses. EBITDA declined 8.5%; 79% growth in other
income and 190bp decline in tax rate enabled adjusted PAT growth of 4% to
INR1,332m.
Consolidated net sales grew 23%, volumes increased 12.4%. Gross margin
contracted 320bp to 49.8%; steep inflation and lag in price increases continued to
impact profitability.
EBITDA margin contracted 276bp to 15.8%, owing to higher ad expenses (up 190bp).
EBITDA grew just 1.9% to INR2,153m (v/s our estimate of INR2,105m). Interest
cost declined 64% due to INR70m forex gain. A 26% increase in other income and
lower tax rate (down 390bp) boosted PAT by 16% to INR1,705m (v/s our estimate
of INR1,567m).
Sales up 23%, driven by 46% growth in international business
Volume growth of 12.4% indicates smart recovery
Source: Company/MOSL
270bp contraction in EBITDA margin, as ad spends increase 190bp
Source: Company/MOSL
2 May 2012
2

Dabur India
Hair oil sales grew 19.8%, led by healthy volume growth and price increases across
the portfolio; Vatika and Amla hair oil recorded strong growth.
Shampoos grew 16.8% on a low base of steep double-digit decline; Henna (green
variant) was the best performer in this category.
Toothpastes grew 8.3%; volume market share increased marginally, with premium
toothpastes doing well.
Skincare sales grew 17.6%, led by distribution realignment and Fem growing at
20%.
Homecare posted strong 18% growth, led by Odonil in all formats (Odonil crossed
INR1b in sales during the quarter); Odomos sales remained under pressure.
Foods grew 30.4% and crossed INR5b in FY12; Real and Active did well and the
company launched new variants like Plum, Pomegranate and Blueberries.
OTC and ethicals grew 13.8% and 18%; Lal Tail and Honitus performed well. Growth
was led by distribution realignment.
The management had indicated volume growth focus in the previous quarter and
the company has been able to achieve that. We note that DABUR has been slow in
raising prices and this has impacted margins. The management is contemplating
gradual price increases to recover profit margins.
DABUR is expanding its rural distribution meaningfully, which will enable it to
grow ahead of the market and increase market share even if rural growth slows
down.
The management expects competitive intensity to sustain in major businesses,
including shampoos and skin care. DABUR intends to focus on the economy
segment of oral care, as Babool has not been showing any meaningful traction.
Steep margin contraction in consumer care (consolidated)
Year Ended March
Net Sales (INR m)
Consumer Care
Foods
Retail
Others
EBIT (INR m)
Consumer Care
Foods
Retail
Others
EBIT Margin (%)
Consumer Care
Foods
Retail
Others
4QFY12
13,636
11,400
1,613
123
500
2,882
2,595
302
(29)
15
22.8
18.7
(23.9)
2.9
4QFY11
11,943
9,508
1,261
67
247
2,648
2,415
235
(23)
21
25.4
18.6
(33.6)
8.5
% Chg
14.2
19.9
28.0
83.0
102.2
8.8
7.5
28.7
30.2
-30.3
-2.6
0.1
9.7
-5.6
FY12
52,832
44,896
6,022
424
1,490
10,822
9,755
1,111
(116)
73
21.7
18.4
(27.4)
4.9
FY11
43,926
34,813
4,933
205
823
9,861
8,975
941
(91)
36
% Chg
20.3
29.0
22.1
106.7
81.0
9.8
8.7
18.0
27.2
101.4
-4.1
-0.6
17.1
0.5
MOSL
25.8
19.1
(44.6)
4.4
Source: Company,
2 May 2012
3

Dabur India
IBD and hair care drive overall growth
Category Growth (%) 1QFY11
Hair Care
8.9
Health Supplements 43.0
Oral Care
20.2
Foods
21.2
Digestives
14.7
Skin care
12.4
Home Care
31.5
IBD (organic)
28.7
2QFY11
2.7
29.4
10.4
21.4
14.1
9.6
43.3
17.9
3QFY11
3.8
12.7
9.4
42.0
11.3
18.0
24.2
14.2
4QFY11
11.1
20.7
8.9
30.1
-3.8
26.3
31.1
9.9
1QFY12
9.0
0.0
12.7
31.5
7.8
16.3
24.9
12.5
2QFY12 3QFY12 4QFY12
15.9
19.6
19.8
7.8
13.5
10.9
6.0
11.6
7.7
27.5
17.4
30.4
3.8
19.3
19.4
0.0
4.9
17.6
0.5
18.0
18.0
22.8
37.8
45.8
Source: Company/MOSL
International margins still under pressure; 35% organic constant currency
revenue growth led by GCC, Egypt and Nigeria
International business organic sales grew 45.8% in INR terms and 35% in constant
currency terms; growth was largely led by volumes and by 28%, 29% and 34%
constant currency growth in GCC, Egypt and Nigeria, respectively.
Hobi posted revenue of INR340m (22% growth) while Namaste posted sales of
INR547m (16% growth).
International subsidiaries reported 34% increase in sales to INR3.8b, with EBITDA
margin expanding 170bp. EBIDTA increased 52%; PAT grew 102%, led by strong
sales in GCC, Egypt and Nigeria on a low base.
Shampoos, hair creams and toothpastes were the growth drivers in international
markets.
DABUR has begun manufacturing Namaste products at the RAK unit. It will look at
the launch of these products in Africa in the current year. The company has also
introduced Hobi products in the MENA region and the modern trade channel in
India.
Headwinds for domestic volume growth and margins clearly visible; Neutral
DABUR has seen acceleration in the domestic market, though competitive intensity
and input cost environment remains a challenge. The company believes that the
huge distribution expansion it has planned in rural India will enable it to grow
ahead of the market.
We note that DABUR is facing aggression on the pricing and promotion front from
players like Colgate (toothpastes), HUL and P&G (shampoos), Marico (hair oils),
and a number of players in skin care. This is unlikely to change, as these players
have an eye on increasing market share. This will force DABUR to continue its
aggressive pricing and higher ad-spends, which will continue to impact profit
margins. DABUR seems comfortable with high ad-spends and benign pricing as
long as it is able to achieve growth. However, we believe that such a strategy can
prove counterproductive if demand slows down, more so in rural areas.
We expect higher growth in international business on a low base, as the GCC
region recovers; success of Namaste products in Africa will hold the key to any
meaningful increase in growth rates, in our view.
We marginally tweak our estimates by factoring in 100bp lower tax rate and INR1b
capex in Sri Lanka. We estimate 18.7% PAT CAGR over FY12-14.
The stock trades at 25.7x FY13E EPS of INR4.4 and 21.5x FY14E EPS of INR5.2.
Maintain
Neutral.
4
2 May 2012

Dabur India
Dabur India: an investment profile
Company description
Dabur India is the second largest FMCG company in India,
in terms of product portfolio. It is the market leader in
the
chyawanprash
category and is increasing its
presence in other traditional categories like hair care,
oral care, household care and foods. Dabur's acquisition
of Fem Care has given it a strategic presence in the high
potential skin care segment.
(aggressive strategy of Marico and Emami), (3)
shampoos (aggressive strategy of P&G, HUL, Garnier,
etc resulting in squeeze in sales growth and margins),
and (4) skin care (rising focus of MNCs on the mass
to mid-premium segment).
Recent developments
Dabur is setting up a beverage plant in Sri Lanka,
with a capacity of ~280,000 cases.
The company has launched new variants of Real
Juices - Plum, Pomegranate and Blueberries.
Dabur is expanding its distribution reach in rural India
very aggressively.
Key investment arguments
Strong herbal positioning, with little competition
from MNCs in categories like hair oil, CHD, health
supplements, etc.
Dabur has the second broadest product portfolio
(after HUL), with presence in high potential
categories like skin care, hair care, oral care and
health supplements.
The company is likely to be under MAT for the next
7-8 years, resulting in huge tax savings.
Valuation and view
Our EPS estimates are INR4.4 for FY13 and INR5.2 for
FY14, implying a PAT CAGR of 20% over FY12-14.
The stock trades at 25.7x FY13E EPS of INR4.4 and
21.5x FY14E EPS of INR5.2. Maintain
Neutral.
Key investment risks
Dabur has witnessed continued deceleration in
standalone sales over the past three quarters and
has been highly dependant on international
business for its PAT growth.
We believe that the company will face higher
competitive intensity in key business segments: (1)
toothpastes (likely entry of P&G), (2) hair oils
Comparative valuations
Dabur
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
25.7
21.5
9.1
7.5
3.3
2.8
19.4
16.2
Marico
24.7
19.8
7.0
5.3
2.3
1.9
16.9
13.4
GCPL
24.7
20.2
5.7
5.0
3.2
2.6
18.1
14.7
Sector view
We have a cautious view on the sector due to
inflationary tendency, volatile input cost and a
possible slowdown in the rural economy.
Companies with low competitive pressures and
broad product portfolios will be able to better
withstand any slowdown in a particular segment.
Longer term prospects bright, given rising incomes
and low penetration.
EPS: MOSL forecast v/s consensus (INR)
MOSL
Consensus
Forecast
Forecast
FY13
4.40
4.43
FY14
5.20
5.23
Variation
(%)
-0.6
-0.6
Target Price and Recommendation
Current
Price (INR)
112
Target
Price (INR)
104
Upside
(%)
-6.9
Reco.
Neutral
Stock performance (1 year)
Shareholding pattern (%)
Promoter
Domestic Inst
Foreign
Others
2 May 2012
Mar-12
68.7
6.5
18.8
6.1
Dec-11
68.7
5.7
19.5
6.1
Mar-11
68.7
7.1
17.7
6.5
5

Dabur India
Financials and Valuation
2 May 2012
6

Dabur India
N O T E S
2 May 2012
7

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