3 November 2014
2QFY15 Results Update | Sector:
Consumer
Dabur India
BSE SENSEX
27,860
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
8,324
DABUR IN
1,756.4
404/6.6
235/154
-1/5/-2
CMP: INR230
TP: INR200
Neutral
Financials & Valuation (INR Million)
Y/E MAR
2015E 2016E 2017E
Net Sales
EBITDA
Adj PAT
Adj.EPS(INR)
Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
81,006 93,367107,959
13,189 15,213 17,888
10,616 12,328 14,549
6.1
16.1
18.3
33.3
37.1
37.8
12.6
7.1
16.1
21.8
32.4
38.6
32.5
10.5
8.3
18.0
26.0
32.1
39.5
27.6
8.8
Dabur’s (DABUR) 2QFY15 results
were slightly below estimates, with consolidated
sales growth of 10.4% to INR19.3b (est. INR20.2b). EBITDA margin contracted
60bp YoY to 17.9% (est. 18.7%), while EBITDA grew 6.6% YoY at INR3.5b (est.
INR3.8b). Recurring PAT grew 15.1% to INR2.9b (est. INR2.9b).
Domestic business
volume growth at 8.7% was driven by Foods (up 29%, 11% of
sales), Hair Care (up 13.9%, 14% of sales), Health Supplements (up 10.2%, 10% of
sales) and Home Care (up 10.2%, 5% of sales). Oral Care (9% of sales) continued to
post subdued performance and grew 8.1%. International business registered 6.6%
sales growth (8.3% constant currency growth).
EBITDA margin down 60bp YoY:
Gross margin contracted 60bp YoY to 53%. RM
price correction benefit to reflect in gross margin in 3QFY15, as per management.
Increase in staff costs (up 40bp YoY to 9.5%) and ad spends (up 10bp YoY to
13.2%) completely offset the savings in other expenses (down 50bp YoY to 12.4%).
EBITDA margin contracted 60bp YoY to 17.9% (est. 18.7%), while EBITDA grew
6.6% YoY to INR3.5b (est. INR3.8b). Higher other income (up 58.5% YoY to
INR444m), lower interest expense (down 49% YoY to INR102m) and tax rate
savings (down 120bp YoY to 17.6%) aided recurring PAT growth of 15.1% to
INR2.9b (est. INR2.9b).
Management call highlights:
a) demand recovery in urban India is not as fast as
expected, b) volume growth guidance of 8-10%, c) A&P to be in 13-14% band with
benign margin outlook, d) tax rate for FY15 to be at 1HFY15 run rate.
Valuation and view:
DABUR’s continued and strong volume growth delivery in a
challenging macro backdrop is a reflection of its balanced portfolio and recent
investments behind distribution expansion, in our view. We have largely retained
our estimates as we incorporate management’s guidance of back-ended recovery.
However, valuations at 37.8x FY15E and 32.5x FY16E EPS are rich, in our view. We
maintain a
Neutral
rating with an unchanged target price of INR200.
Gautam Duggad
(Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404
Manish Poddar
(Manish.Poddar@MotilalOswal.com); +91 22 3027 8029
Investors are advised to refer through disclosures made at the end of the Research Report.

Dabur
Consol sales growth of 10.4%; margins down 60bp
Consolidated net sales grew 10.4% YoY to INR 19.3b (est. INR20.2b) led by 8.7%
domestic volume growth.
Gross margin contracted 60bp YoY to 53%. RM price correction benefit to reflect
in gross margins in 3QFY15, as per management.
Increase in staff costs (up 40bp YoY to 9.5%) and ad spends (up 10bp YoY to
13.2%) were completely offset by savings in other expenses (down 50bp YoY to
12.4%). EBITDA margins contracted 60bp YoY to 17.9% (est. 18.7%). EBITDA
grew 6.6% YoY to INR3.5b (est. INR3.8b).
Higher other income (up 58.5% YoY to INR444m), lower interest expense (down
49% YoY to INR102m) and tax rate savings (down 120bp YoY to 17.6%) aided
recurring PAT growth of 15.1% to INR2.9b (est. INR2.9b).
Standalone sales
increased by 12.3%, gross margin declined 90bps YoY to 47.7%
while EBIDTA margin contracted 140bps YoY to 17.3% as ad-spends, other
expenses and staff costs increased 20bps, 20bps and 10bps, respectively.
EBIDTA posted 4% YoY growth to INR 2.2b. Standalone PAT grew 10.5% to INR
1.9b.
Imputed Subsidiaries (34% of revenues)
reported 6.6% increase in sales to
INR6.4 b, with 90bp EBITDA margin expansion. Imputed subsidiary PAT is up
25.8% YoY to INR1b.
Exhibit 2: Consol volume growth at 6.5% in our view
Sales Growth (% YoY)
10.8
12.4 12.0
10.5
9.5
Volume growth (%)
11.5
9.0
10.7
9.0
Exhibit 1: Sales below estimates
29.8
34.5
23.0
Net Sales (INR m)
2
21.40.6
12.312.3 12.7
14.5
16.8 15.5
10.0
13.2
10.4
10.0
8.8
6.5
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: EBIDTA margin contracted 60bp YoY
Gross margin (%)
EBITDA margin (%)
Exhibit 4: PAT slightly below estimates
PAT Growth (%)
23.5
22.2
20.7
20.6
17.6
17.3
16.4
16.0
15.3
8.4
11.9
PAT (INR m)
13.3
15.1
Source: Company, MOSL
Source: Company, MOSL
3 November 2014
2

Dabur
Domestic business: Foods, Hair Care and Health Supplement outperform;
Oral Care remains weak
Domestic business has reported 12.3% sales growth with underlying volume
growth of 8.7%. Growth was driven by Foods (up 29%, 11% of sales), Hair Care
(up 13.9%, 14% of sales), Health Supplements (up 10.2%, 10% of sales) and
Home Care (up 10.2%, 5% of sales). Oral Care (9% of sales) continued to post
subdued performance and grew 8.1%.
Consumer Care sales grew 7.6% YoY while EBIT margins declined 30bps to
20.7%. Foods division continues its robust growth trajectory with 29% YoY
growth partly due to early Diwali. However, EBIT margins declined 60bps YoY to
14.4%
Oral Care posted 11.5% growth with strong double digit growth in Red while
Babool remained under pressure (muted growth for LUP). Babool was impacted
due to defocusing on LUP packs while lead brands are offering LUP offerings.
Syndicated numbers for Oral Care show sharp slowdown (negative volumes) for
the recent quarter.
Skin care (10% growth) showed early sign of revival with double digit growth in
Fem.
Exhibit 5: Segment wise sales breakup (INR m)
Y/E March
Segments
Health Supplements
Digestives
OTC & Ethicals
HAIR CARE
Home Care
Oral Care
Skin Care
Consumer Care
Foods
Domestic – FMCG
Others
Domestic – Total
Retail
International – Total (incl. acquisitions)
Total
2QFY15
1,975
732
1,156
2,796
856
1,795
590
9,900
2,385
12,285
493
12,778
216
6,454
19,448
2QFY14
1,793
651
1,075
2,455
777
1,660
538
8,949
1,849
10,798
449
11,247
166
6,176
17,589
% Chg 1HFY15
10.2
12.4
7.5
13.9
10.2
8.1
9.7
10.6
29.0
13.8
9.8
13.6
30.1
4.5
10.6
3,576
1,501
2,117
5,733
1,593
3,399
1,185
19,104
5,037
24,141
752
24,893
409
12,935
38,237
1HFY14
3,110
1,342
1,996
5,163
1,419
3,146
1,108
17,285
4,049
21,334
868
22,475
335
11,664
34,281
% Chg
15.0
11.8
6.1
11.0
12.3
8.0
6.9
10.5
24.4
13.2
-13.4
10.8
22.1
10.9
11.5
Source: Company, MOSL
Exhibit 6: Category wise performance
Category Growth (%) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15
Hair Care
Health Supplements
Oral Care
Foods
Digestives
Skin care
Home Care
IBD (organic)
9.0
0.0
12.7
31.5
7.8
16.3
24.9
12.5
15.9
7.8
6.0
27.5
3.8
0.0
0.5
22.8
19.6
13.5
11.6
17.4
19.3
4.9
18.0
37.8
19.8
10.9
7.7
30.4
19.4
17.6
18.0
45.8
10.4
18.0
8.1
34.5
9.8
13.3
14.4
24.0
13.2
15.7
7.0
18.1
11.9
24.8
23.0
24.8
13.9
12.0
13.6
22.1
-5.4
15.7
30.5
9.0
9.6
22.6
12.3
22.6
1.3
11.1
33.3
19.7
11.8
7.5
8.6
18.7
15.0
13.0
26.0
18.5
4.0
12.7
18.7
22.0
12.0
17.5
25.1
25.8
6.9
19.5
10.4
17.6
17.7
13.4
16.0
29.0
5.8
17.6
17.4
20.7
23.2
10.0
12.8
20.0
8.5
21.6
7.9
20.5
11.3
4.4
14.8
12.4
13.9
10.2
8.1
29.0
12.4
9.7
10.2
17.5
Source: Company, MOSL
3 November 2014
3

Dabur
IBD (34% of consolidated sales)
International business grew 6.6% (8.3% constant currency growth). Growth was
driven by Turkey (32%), Egypt (28%), Levant (27%) and GCC (21%).
Margin expanded 90bp YoY to 19.3%. Imputed subsidiary PAT is up 25.8% YoY to
INR1b.
Concall highlights
Quarterly Performance
Demand recovery in urban India is not as fast as expected. Moderation in
interest rate and inflation are key variables to watch out for.
Zero impact of raw material benefit in gross margins in this quarter, benefit to
flow in post November.
Price growth: Flow through of pricing of 3% from earlier quarters.
Foods segment outperformed partly due to early Diwali. Expect foods segment
to grow in mid teens in the near term.
Modern trade (11% of business) growth has been 25% for the company.
Category Dynamics
Healthcare: Growth moderated to 10.1% due to extended summers. Healthcare
segment (innovation + distribution led) to grow ahead of consumer care
category growth.
Digestives: 12.3% growth due to consumer activation and aggressive digital
marketing.
OTC Categories (7.5% growth) impacted due to seasonal nature.
Hair Care: Good growth (13.9%) in both coconut and perfumed hair oils.
Shampoos posted 15.4% growth. Dabur Amla witnessing static volume market
share.
Skin care (10% growth) showed early sign of revival with double digit growth in
Fem.
Oral Care: 11.5% growth for the category with strong double digit growth in Red
while Babool remained under pressure (muted growth for LUP). Babool
impacted due to defocusing on LUP packs while lead brands are offering LUP
offerings. Syndicated numbers for Oral Care show sharp slowdown (negative
volumes).
Will not foray into insecticide/out of home categories with Odomos brand.
International business growth of 8.3% in Q2FY15.
Namaste business under pressure due to category slowdown, for non US
business–base effect coming into play.
Guidance
Volume growth of 8-10% in FY15.
A&P to be in 13-14% band. Margin outlook remain benign. Expect better
margins in Q4FY15.
Tax rate for FY15 to be at 1HFY15 run rate.
3 November 2014
4

Dabur
Valuation and view
Dabur’s continued strong volume growth delivery in the challenging macro
backdrop is a reflection of its balanced portfolio and recent investments behind
distribution expansion in our view.
We have largely retained our estimates, as we incorporate management
guidance of back ended recovery.
However, valuations at 37.8x FY15 and 32.5x FY16 EPS are rich in our view. We
maintain our
Neutral
rating with an unchanged target price of INR200.
Exhibit 7: Revised estimates downward 2%-4%
(INR m)
Net Sales
EBITDA
Adjusted PAT
FY15E
81,006
13,189
10,616
New
FY16E FY17E
93,367 107,959
15,213 17,888
12,328 14,549
FY15E
81,915
13,571
10,791
Old
FY16E FY17E
94,667 109,674
15,707 18,527
12,706 15,135
% Change
FY15E FY16E FY17E
-1.1%
-1.4%
-1.6%
-2.8%
-3.1%
-3.5%
-1.6%
-3.0%
-3.9%
Source: Company, MOSL
3 November 2014
5

Dabur
Story in charts
Exhibit 8: Sales growth in high teens driven by diversified
portfolio
Sales (INR b)
29.6%
20.3%
Sales growth (%)
13.9
15.6%
12.5
10.5
16.3%
15.1%
14.5%
15.3%
Exhibit 9: Steady volume growth in high single digits
Volume growth (%)
10.9
9.7
8.8
41
FY11
53
FY12
61
FY13
71
FY14
81
FY15E
93
FY16E
108
FY17E
FY10
FY11
FY12
FY13
FY14
1QFY15
Source: Company, MOSL
Source: Company, MOSL
Exhibit 10: IBD sales grew 5x in last 5 years
IBD Sales
19,054
16,161
8,922
3,760
4,770
6,025
21,220
Exhibit 11: Steady margin improvement driven by mix
benefits
EBITDA Margin (%)
18.7
19.0
16.6
16.4
15.7
16.1
16.3
16.3
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY10
FY11
FY12
FY13
FY14 FY15E FY16E FY17E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 12: PAT CAGR growth of 16.7% in FY14-17E
PAT (INR b)
19.1%
12.3%
13.4%
19.1%
PAT growth (%)
Exhibit 13: RoE (x) and RoCE (x)
RoE (%)
40.9
18.0%
30.7
37.5
37.0
36.8
35.1
38.2
34.5
RoCE (%)
37.1
33.3
38.6
39.5
16.1%
16.1%
32.4
32.1
5.7
FY11
6.4
FY12
7.7
FY13
9.1
FY14
10.6
FY15E
12.3
FY16E
14.5
FY17E
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
Source: Company, MOSL
Source: Company, MOSL
3 November 2014
6

Dabur
Dabur: an investment profile
Company description
Dabur India is the second largest FMCG company in
India, in terms of Product portfolio. Dabur is a market
leader in 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 given it a strategic presence in the high
potential skin care segment.
Recent developments
Dabur has re-launched Amla Hair Oil with a new
flip top pack.
Project CORE to enhance distribution reach in
urban chemist outlets launched.
Dabur trades at 37.8x FY15E and 32.5x FY16E EPS.
Dabur’s steady earnings growth trajectory
underlined by healthy 8-10% volume growth
coupled with its diversified RM basket (which
shields it from dependence on a particular RM
unlike its peers) provides good earnings visibility.
Additionally, distribution enhancement initiatives
like Project Core can provide modest upsides going
forward. Maintain
Neutral
with a TP of INR200.
We have a cautious view on the sector on back of
inflationary tendency, volatile input cost
environment and a possible slowdown in the rural
economy.
Companies with low competitive pressures and
broad product portfolios will be able to better with
stand any slowdown in a particular segment.
Longer term prospects bright, given rising incomes
and low penetration.
Valuation and view
Key investment arguments
Strong herbal positioning with little competition
from MNC 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.
Higher than anticipated ad spends could impact
profitability adversely.
We believe that company could face rising
competitive intensity in some of the key business
segments; 1) Toothpaste (P&G has entered the
category) 2) Hair Oils (aggressive strategy of Marico
and Emami) 3) Shampoo (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).
Dabur
37.8
32.5
12.6
10.5
4.9
4.2
29.8
25.6
Marico
35.2
30.3
9.2
7.5
3.5
2.9
22.8
19.2
GCPL
36.4
30.2
8.1
6.9
4.0
3.3
25.3
21.2
Sector view
Key investment risks
Comparative valuations
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY15
FY16
6.1
7.1
Consensus
Forecast
6.1
7.3
Variation
(%)
-0.2
-2.4
Target price and recommendation
Current
Price (INR)
230
Target
Price (INR)
200
Downside
(%)
-13.0
Reco.
Neutral
Shareholding pattern (%)
Promoter
DII
FII
Others
Sep-14
68.2
5.0
20.5
6.3
Jun-14
68.2
5.6
19.7
6.6
Sep-13
68.6
4.0
20.7
6.7
Stock performance (1-year)
Note: FII Includes depository receipts
3 November 2014
7

Dabur
Financials and valuations
Income statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2014
70,734
15.1
11,354
16.1
975
10,379
-542
1,525
11,363
-2,191
-19.3
25
9,146
9,146
19.1
2015E
81,006
14.5
13,189
16.3
1,191
11,999
-450
1,756
13,305
-2,674
-20.1
14
10,616
10,616
16.1
(INR Million)
2016E
2017E
93,367 107,959
15.3
15.6
15,213 17,888
16.3
16.6
1,281
1,370
13,933 16,518
-510
-562
2,032
2,288
15,455 18,243
-3,106
-3,667
-20.1
-20.1
20
28
12,328 14,549
12,328 14,549
16.1
18.0
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Leverage Ratios (%)
Debt/Equity (x)
2014
5.2
4.7
15.2
0.0
0.0
43.9
49.1
15.1
5.6
34.8
0.0
34.5
38.2
2.0
34.8
0.4
2015E
6.1
5.4
18.3
2.6
42.7
37.8
42.6
12.6
4.9
29.8
1.1
33.3
37.1
1.9
30.2
0.4
2016E
7.1
6.3
21.8
3.0
42.7
32.5
36.3
10.5
4.2
25.6
1.3
32.4
38.6
1.9
30.2
0.3
2017E
8.3
7.6
26.0
3.6
42.7
27.6
30.4
8.8
3.6
21.4
1.5
32.1
39.5
2.0
30.2
0.2
Balance sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2014
1,744
24,816
26,560
9,511
-448
36,230
16,279
-6,459
9,820
217
10,765
24,467
9,723
6,753
5,194
2,797
16,440
13,330
3,110
8,027
36,230
2015E
1,744
30,135
31,878
11,441
-84
43,492
18,479
-7,650
10,829
433
11,841
34,918
13,740
6,703
7,511
6,964
22,294
13,257
9,037
12,624
43,492
(INR Million)
2016E
2017E
1,744
1,744
36,311 43,600
38,055 45,344
9,791
8,941
-84
-84
48,039 54,505
20,679 22,879
-8,931 -10,301
11,748 12,578
433
433
13,025 15,630
40,643 47,847
15,836 18,311
7,726
8,933
8,952 10,973
8,129
9,630
25,576 29,748
15,139 17,505
10,437 12,243
15,067 18,099
48,039 54,505
E: MOSL Estimates
Cash flow statement
Y/E Mar
OP/(Loss) before Tax
Depreciation
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
CF from Inv. Activity
Inc / (Dec) in Debt
Divd Paid (incl Tax)
Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
11,363
975
-984
-2,105
1,529
10,778
-2,090
-1,479
-3,568
-3,065
0
-2,571
-5,634
1,576
3,618
5,194
2015E
13,305
1,191
-1,306
-2,594
-2,280
8,316
-2,416
-1,076
-3,492
1,930
-4,528
90
-2,506
2,317
5,194
7,511
(INR Million)
2016E
15,455
1,281
-1,522
-3,014
-1,002
11,198
-2,200
-1,184
-3,384
-1,650
-5,258
534
-6,372
1,441
7,511
8,952
2017E
18,243
1,370
-1,726
-3,557
-1,011
13,320
-2,200
-2,605
-4,805
-850
-6,205
559
-6,494
2,021
8,952
10,973
3 November 2014
8

Dabur
NOTES
3 November 2014
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