Dabur India Ltd. - Q4FY12 Result Update - Padmakshi Financial Services

Key Highlights

The company posted consolidated sales of Rs. 13636 mn up 22% y-o-y but declined by 7% qoq on the account of poor performance by health supplements and oral care business.

International business grew by 45.8% for the quarter (excluding numbers from Hobi & Namaste) backed by strong growth in Shampoos, Hair Cream and Toothpaste in the emerging markets. Domestic sales reported a growth of 19.2%.

EBITDA increased by 8% to Rs. 2433 mn while margins contracted by 220 bps to 15.79%.

Consolidated PAT increased by 16% yoy to Rs. 1615 mn. during Q4FY12 with margins falling by 75 bps to 11.85.

Revenues

Consolidated sales for DIL increased by 22% to Rs. 13636 mn. This growth was a combination of price hikes and a 12.4% volume growth. The domestic sale which contributes 70% to the overall sales was mainly driven by food, hair care and digestives which grew by 31%, 20% and 19% respectively.

Food business showed a strong contribution both in terms of revenue

(12% in Q4FY12 vs. 11% in Q4FY11) and margins (10.47% in Q4FY12 vs. 8.29% in Q4FY11). The company launched Plum, Pomegranate & Super Berries as variants for its brands (Real and Active) and has planned more extensions for the coming quarters. The consumer care division was led by hair care, home care and digestives. In the hair category oil grew by 20%, where as shampoo, which persists to face high competition grew by 16.8%. Odonil in the home care business witnessed strong growth across formats (blocks, aerosols etc). Hajmola led growth in digestives due to the launch of new variants. International business grew at a robust rate of 45.8% in Q4FY12 and 27.2% in FY12. GCC, Egypt and Nigeria remained the key growth areas with Shampoos, Hair Cream and Toothpaste the key growth segments. Hobi and Namaste recorded revenue growth of 22% and 15.6% respectively in Q4FY12.

EBITDA Margins take a hit...

Cost pressures have dented the EBITDA margin by 220bps to 15.79%. The quarter witnessed some advertising expenses that were incurred for the new launches and variants of different brands and products in the domestic as well international markets. The material cost as a percent to sales were up 648 bps to 45% vis-à-vis 39% in Q3FY12. The company had cost pressures in retrieving palm oil, menthe, vegetable oil s and crude. Also the advertising and promotional expenses during the quarter increased to 13.4% as compared to 11.5% in previous year.

PAT Margins up 16%

Consolidated PAT was up by 16% to Rs. 1615 mn. This was high despite severe input pressures and increase in the advertising spends. The low interest cost on account of inclusion of foreign exchange gain and low tax outflow also contributed to the same. Margins for the quarter however were disappointing; a drop of 75 bps yoy from 12.6% to 11.85%.

Going Ahead...

Despite of the recent challenges faced by the company in terms of increased input cost we believe that the company will survive the inflation pressure by resorting to price hikes as demand elasticity has been good. The company's sales are expected to grow at a CAGR of 20% for FY12 - FY14E. With the complete integration of Hobi and Namaste we believe the international market will start contributing significant portion to the company's consolidated numbers. The management also intends to extend its rural initiatives to 15 states from the current 10 states and also increase its village reach to 27000 by FY13 as against 14000 in FY11.

Valuation

Dabur India Limited can become a long term winner considering the demand elaticity with prices as well as better product mix to capitalise on oppertunities domestically as well as international.Our estimates remain unchanged. At CMP of Rs. 106, it is trading at 22.6x its FY13E EPS of Rs. 4.68 and 6.4x FY13E EV/EBIDTA We remain positive on the stock with a price target of Rs.136 - a return of 28%.

Source : Equity Bulls

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