Dabur India - Business Standard

Company Report
Industry: FMCG
Dabur India
Changing with the times
Amnish Aggarwal ([email protected])
+91-22-66322233
Gaurav Jogani ([email protected])
+91-22-66322238
Dabur India
Contents
Page No.
DABUR: Reinventing to remain relevant in herbal consumer and
healthcare segment .................................................................................................... 4
Dabur is increasing product innovations and renovations ................................................................ 6
Dabur Chyawanprash: Sugarfree and flavoured variants ............................................................ 6
Juices: New variants and Coconut water hold promise ............................................................... 6
Hair Oils: Increasing presence in value-added hair oils ............................................................... 7
Odonil: innovations drive high growth ........................................................................................ 7
Hajmola: extending to ethnic beverages ..................................................................................... 8
Oral care: sustained market share gains ...................................................................................... 9
Dabur creating a younger organization across functions .................................................................. 9
OTC and Ayurvedic Ethicals to be focus area ........................................................... 10
Portfolio premiumisation is driving value ................................................................ 12
Distribution expansion to increase sales in urban India .......................................... 13
Patanjali: emerging challenger in Consumer care? .................................................. 16
IBD: acquisitions unlikely, expect gradual recovery ................................................. 19
Estimate 18.5% PAT CAGR over FY15-18, BUY ......................................................... 22
Dabur H1FY16; Margin expansion led profit growth; Foods and currency depreciation retard
growth ............................................................................................................................................. 25
Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that
the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.
Please refer to important disclosures and disclaimers at the end of the report
January 04, 2016
2
Company Report
January 04, 2016
Dabur India
Rating
Price
Target Price
Implied Upside
Sensex
Nifty
BUY
Rs276
Rs318
15.2%
26,161
7,963
(Prices as on January 01, 2016)
Trading data
Market Cap. (Rs bn)
Shares o/s (m)
3M Avg. Daily value (Rs m)
486.2
1,759.0
340.5
Major shareholders
Promoters
Foreign
Domestic Inst.
Public & Other
68.08%
20.96%
4.42%
6.54%
Stock Performance
(%)
1M
Absolute
(0.8)
Relative
(0.7)
6M
(2.2)
4.5
How we differ from Consensus
EPS (Rs)
PL
Cons.
2017
8.6
7.3
2018
10.0
8.6
12M
18.9
23.8
% Diff.
17.7
16.3
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
(Rs)
350
300
250
200
150
100
50
0
Jan-15
Distribution Expansion: Dabur is revamping its distribution to increase the chemist
coverage 3x (Project CORE), direct rural reach (Project Double) by 3.5x and focus on
key urban centres under Project 50:50, which will thus boost sales. The company
has recruited 275 medical representatives to educate the medical fraternity about
the efficacy of its products which will not only benefit OTC and Ethicals but also
healthcare products. Dabur is looking at new launches and market development in
OTC and ethicals to capture growing appetite for Herbal and Ayurvedic products.
Patanjali to increase competition: Dabur competes with Patanjali for 55% of its
domestic sales and is vulnerable due to 15-30% lower pricing by Patanjali
(Promoted by Yoga Guru Baba Ramdev) in categories like Toothpaste, Honey,
Chyawanprash and Hair oils. However overall impact on Dabur would be limited as
the promotion of herbal products by Patanjali will expand the market.
Namaste to lead IBD growth: Dabur’s focus is on improving profitability in
Namaste and Hobi Kozmetik and is unlikely to undertake acquisitions in
international business. Dabur’s overseas sales and profit growth are likely to
accelerate on expected turnaround in Namaste which will boost EBITDA to Rs896m
in FY18 from 0.4m in FY15. IBD is likely to report 13% CAGR in Sales and 20.4%
CAGR in EBITDA. Political disturbances in Middle East, Nepal and currency
devaluation in Turkey remain a key risk.
Key financials (Y/e March)
Price Performance(RIC:DABU.BO,BB:DABUR IN)
Source: Bloomberg
Dabur remains a compelling play on the Rs100bn Herbal and Natural products
market which is growing at 15-20% CAGR. The company has launched premium
products in Chyawanprash, Hair Oil, Air freshener, Hajmola, Skin Bleach and
Beverages to cater to the emerging Indian consumer. Dabur is investing in
distribution and new products to accelerate sales even as it faces challenge from
Patanjali in few of its segments. We estimate consolidated sales to grow at 13%
CAGR with 18.5% PAT CAGR over FY15-18. Dabur is trading at 28.6x Dec2017 EPS of
Rs9.6. We value the stock at 33xDec17 EPS given steady track record of profit
growth, ROE of 30% and ROCE of ~35% and dividend payout of 35%. Initiate
coverage with ‘Buy’ rating and target price of Rs318.
Revenues (Rs m)
Growth (%)
EBITDA (Rs m)
PAT (Rs m)
EPS (Rs)
Growth (%)
Net DPS (Rs)
Profitability & Valuation
EBITDA margin (%)
RoE (%)
RoCE (%)
EV / sales (x)
EV / EBITDA (x)
PE (x)
P / BV (x)
Net dividend yield (%)
Source: Company Data; PL Research
2015
2016E
2017E
2018E
78,272
10.6
13,164
10,658
6.1
15.7
2.0
86,489
10.5
15,373
12,850
7.3
20.2
2.5
98,907
14.4
18,179
15,246
8.6
18.3
2.9
113,155
14.4
21,144
17,744
10.0
16.1
3.4
2015
16.8
32.8
33.6
6.3
37.4
45.6
14.5
0.7
2016E
17.8
31.3
34.2
5.7
31.8
37.9
11.8
0.9
2017E
18.4
30.6
35.7
4.9
26.9
32.0
9.7
1.0
2018E
18.7
29.6
35.7
4.3
23.1
27.6
8.1
1.2
Dabur India
DABUR: Reinventing to remain relevant in herbal consumer
and healthcare segment
Dabur remains a compelling play on the rising consumer affinity towards herbal and
natural products. Organic products are manufactured from natural ingredients
extracted from plants, herbs and flowers under eco-friendly conditions. Organic
products have very little synthetic chemicals, parabens, sulphates, artificial colours
and fragrances. Dabur is the largest company in the herbal/Ayurvedic space with
presence across spectrum of products ranging from Hair care, Health supplements,
OTC, ethicals, Oral care, Beverages and Digestives. We note that herbal products are
~85% of domestic sales of Dabur. The company competes with Emami, Himalaya,
Patanjali, Hamdard, Omved etc. in a fast evolving market.
Exhibit 1:
Hair care
DABUR has well diversified portfolio in herbal and natural Consumer and Healthcare products
Category
Market
Market
Segment
Sales %
Brands
Size (Rs bn) Position
Share %
Amla, Vatika, Almond, Anmol
No1 in Amla, Amla - 56,
Hair Oil
19.3
87
Coconut, Keratex
No 2 overall Overall 14
Shampoo
4.0
Vatika
52
No4
5
Foods
Healthcare
Oral Care
Baby and Skin
Marico, Bajaj Corp
HUL, P&G, L’Oreal
Foods
17.7
Real, Active, Homemade
18
No1
52
Chyawanprash
8.2
Chyawanprash, Ratanprash
9
No 1
65
Honey
4.8
Dabur
6
No1
60
Glucose
3.9
Glucose-D, GlucoPlus-C
10
No.2
26
Oral Care
13.8
Babool, Dabur Red, Meswak
70
No 3
13
Digestives
5.1
Hajmola, Pudin Hara, Hingoli,
Yoodley
6
No1
55
Satmola, Swad
Air Fresheners
3.6
Odonil
5.5
No.1
42
Godrej Consumer,
Reckitt Benckiser, JK
Helene Curtis
Mosquito Repellent
creams
1.4
Odomos
1
No.1
85
Godrej Consumer
Toilet Cleaners
1.0
Sanifresh
6
No.2
11
Skin Care
1.9
Gulabari
NA
No 1
NA
Baby Care
1.8
Lal Tail, baby massage Oil
10
No.2
Digestives
Home Care
Competitors
Pepsi, ITC, Future Group
Baidyanath, Emami,
Patanjali
Himalaya, Patanjali,
Hamdard
Heinz, Rasna
Colgate, HUVR,
Himalaya, P&G
Reckitt Benckiser,
Domex
Patanjali
Johnson & Johnson &
Himalaya
Source: Company Data, PL Research
January 04, 2016
4
Dabur India
Herbal and natural products are gaining acceptance in the global personal care
industry. Organic personal care market globally was US$7.5bn in 2012 and is growing
at ~10% CAGR which will increase the industry size to US$14bn by 2018. In addition,
there is growing market for natural nutritional and healthcare products.
Herbal and natural products have been known in India since ages and find reference
in various scriptures and books written and published since old times. India has
immense variety of flora and fauna which is required for the development of this
industry. Although it is difficult to estimate the industry size given wide spread usage
and presence of unorganized sector, the size of herbal personal care, healthcare and
OTC segment could be Rs100bn which is likely to grow by 18-20% CAGR.
Dabur is in the process of re-inventing itself to remain relevant in the fast changing
environment where the consumer ethos, values, tastes change rapidly. The company
is looking at radical changes in the organization to remain relevant in the coming
decades. These include production rationalization to have products which are
relevant to the youth, expanding distribution to increase depth in rural areas and
increase efficiency in urban areas, improving communication with the emerging
consuming class and creating a young organization for fresh ideas and speedy
implementation of the same.
January 04, 2016
5
Dabur India
Dabur is increasing product innovations and renovations
India has one of the youngest populations globally and new generation has different
tastes, values, ethos and outlook for various products. Consequently, some of the
products which were relevant in the past may become irrelevant in future. Dabur
had undertaken a portfolio rationalization earlier which saw the company exit from
Pharma business and entry into segments like Juices, Toothpaste and Shampoo
which have seen considerable scale up in past decade. Dabur is in the process of
reengineering its product portfolio and business to remain relevant to emerging
consumers.
Dabur Chyawanprash: Sugarfree and flavoured variants
Dabur has 65% share in Rs9bn Chyawanprash segment but it is considered as
traditional product with limited appeal for the youth and children. Dabur is looking
to increase category appeal across sections with innovations. The company has
launched a sugar free variant (Chyawanprakash) for diabetics and has launched a
value-added premium variant (Ratnaprash). Dabur has launched Chyawanprash in
Chocolate, Mango and mixed fruit variants which has increased the product appeal
among youth and children. Chyawanprash has been growing at 15% CAGR and new
innovations account for more than 10% of sales within a few years of its launch.
Juices: New variants and Coconut water hold promise
Juices account for ~15% (Rs7.6bn) of standalone sales and have grown at 22.6%
CGAR in the past five years and 20% in FY15. Dabur is market leader in this segment
with close to 55% market share. Dabur faces competition from Tropicana, Sunkist
and B Natural (ITC). Dabur has distinguished brand identity with ‘Real’ for juices with
added sugar and ‘Activ’ for 100% pure juice without added sugar.
Dabur is looking to diversify to other beverages under the Real umbrella with Burrst
in fruit drinks, Real Shakes (Milk-based fruit shakes), Real Activ drinking Yoghurt and
Real Activ Coconut water. In addition, it has launched new variants with flavours like
Grapes, Peach, Apricot, Jamun, Cranberry etc. Products like Shakes and drinking
yoghurt have been a limited success. Dabur has also launched coconut water, a
popular natural beverage in India, entering a new segment in beverages. It is fixing
up sourcing and supply chain issues in this product, given huge scalability potential in
this category.
January 04, 2016
6
Dabur India
Hair Oils: Increasing presence in value-added hair oils
Hair oils are the single largest product segment (19% of standalone sales) of Dabur
India. Dabur Amla has become synonymous with Amla-based hair oils in the country
with more than 55% share in Rs13bn category. Dabur’s hair oils portfolio has grown
at 13.5% CAGR in the past five years; Dabur Amla has grown at 12% CAGR.
Dabur has revamped its portfolio to improve its standing in Rs80bn hair oil category.
Dabur launched coconut enriched oil under the ‘Vatika’ brand which was extended
to Vatika Almond enriched oil. Dabur extended pure coconut oil brand ‘Anmol’ to
Anmol coconut hair oil which is non sticky oil with Jasmine. They also strengthened
their presence in value-added light hair oils with the launch of Dabur Almond oil and
Dabur Olive hair oil. Dabur entered therapeutic hair oil segment with Dabur Keratex
made from Ayurvedic herbs for hair fall control and scalp nourishment. Their
strategy to capitalize on distribution and increase their presence in value-added light
hair oils has the potential to accelerate growth as the brands gain traction.
Odonil: innovations drive high growth
Odonil is the largest home care brand for Dabur with sales of ~Rs2bn. Dabur has
extended the basic Odonil product to more fragrances. The product is now available
in various formats like Blocks, Aerosol’s, Pluggy, Gel, Occasions and One touch. This
has changed the positioning to a air freshener brand with presence in various
formats. Odonil has grown at 30% CAGR in the past five years and should sustain
high teen’s growth in coming years, due to rising hygiene awareness.
January 04, 2016
7
Dabur India
Hajmola: extending to ethnic beverages
Hajmola is a popular brand of digestive tablets (Goli) which has seen significant
transformation over the years. Dabur launched digestive Hajmola candy with plain,
mango and imli flavors which have been extended to Amrud and Chuzkara. Dabur
launched variants like Imli, Pudina, Anardana and Chatpat in base Hajmola Goli to
remain relevant. Hajmola competes with unorganized players in price sensitive
segment (Rs0.5 and Rs1 price points) which limits the growth. So it has extended
Hajmola franchisee to ethnic drinks with the launch of Hajmola Yoodley in 6 variants.
Hajmola Yoodley will compete with Paperboat in Rs1.5bn organised ethnic
beverages market which offers huge growth potential given large unorganized
market for these traditional products. The category will also gain from growing shift
towards natural products and focus on ensuring hygienic products. Dabur has
launched it in variants like Aam Panna, Nimboo Shikanji, Guava, Jaljeera, Kala Khatta
and GolGappa. The products are currently available in select territories in modern
trade and likely to see significant scale up once the supply chain is established.
Dabur believes that it has the right to win in this product, given its affinity with
natural/ethnic products and deep distribution in the country. Yoodley can be a game
changer for low growth digestive business of Dabur.
January 04, 2016
8
Dabur India
Oral care: sustained market share gains
Dabur is the third largest oral care player in India with market share of ~14% and
presence in toothpowder, toothpaste and toothbrushes. Dabur has presence in
herbal segment in toothpastes with Babool in economy segment, Dabur Red in mass
segment and Meswak in the mid premium segment. The company drives ~Rs7.5bn
sales from oral care and toothpaste accounts for ~80% of this. Dabur has grown
toothpaste sales by 15% CAGR and has steadily gained market share in the segment.
Oral care industry is moving towards natural/herbal products as Colgate has
launched products with Neem, Charcoal and Active Salt etc. in its products. We
expect Dabur to face rising competition from Himalaya and Patanjali, given their
reputation in herbal products. We expect Dabur to step up innovation in this product
segment. Dabur has also started advertising Meswak to compete with Patanjali in
this segment.
Dabur creating a younger organization across functions
Dabur is creating a young organization to cater to changing consumer aspirations in
emerging India. 65% of total employees are <35 years of age in comparison to 45
years sometime back. Dabur has created a Youth Committee (Y-Com) on the lines of
the management committee of an organization. This committee consists of the
younger members of the marketing team and their job is to screen and clear all new
advertising and product development programs to find suitability for youth. They
also organize regular interactions with college students to better understand their
needs and aspirations.
New generation is being encouraged to have rising say in key aspects like product
development, sales and marketing. Sales and marketing team interacts with
students/ participates and sponsors MTV shows to get a pulse of the market. Dabur
is thus aiming at creating an array of products which cater to the aspirations of youth
and shed its image of a company with mature products and communication. It is
increasingly using internet and social media for key brands and promotions. The
results of these initiatives are visible in new product launches and communications
which should start reflecting in numbers after a while.
January 04, 2016
9
Dabur India
OTC and Ayurvedic Ethicals to be focus area
OTC and Ayurvedic Ethicals contribute ~Rs5bn (9.1%) to the standalone sales of the
company. OTC and ethicals portfolio has products like Dabur Lal Tail, Honitus, Janam
Ghunti, Dashmularishta, Ashokarishta and other Ayurvedic medicines. OTC portfolio
accounts for 65%, while Ayurvedic medicines account for 35% of sales of this
business. OTC and ethicals have grown at 11% CAGR in the past five years with OTC
products growing at a faster pace. OTC and Ethicals has higher than company
average margins and acceleration in growth rates will add to the profitability and
margins of the company.
OTC healthcare – OTC healthcare segment contributes Rs3bn to total sales of Dabur.
Dabur Lal tail, Janam Ghunti, Honitus cough Syrup and drops are main products. Lal
Tail has 33% share in the baby massage oil market. Dabur has brought Madhuvani
under Honitus umbrella. Honitus is being promoted by association with clinics, trade
fairs, promotional packs and FM Radio channels.
Dabur is looking at increasing presence in Rs10bn Baby care segment under the
brand “Dabur baby”. It has launched “Dabur Baby” massage oil which has goodness
of olives and almonds and has no added paraffin. Dabur’s plans to launch more
products like skin cream, soaps etc in this segment. Baby care looks attractive given
15-20% sales CAGR and dominance of one player (Johnson and Johnson) in the
segment. However we believe that Dabur needs to invest in advertising and sales
promotions as the category has become synonymous with the market leader.
Dabur is looking at identifying emerging lifestyle segments in healthcare for
expanding the scope of OTC segment. We believe growing incidence of lifestyle
ailments like acidity, obesity, diabetes, stress, body pain, diet deficiency, vitamin and
protein deficiency, hair fall, eye sight etc present a huge opportunity of growth in the
coming years. We note that such herbal ailments are already used by consumers
globally, and the trends could be the same.
January 04, 2016
10
Dabur India
Ayurvedic Ethicals: Ayurvedic ethicals contribute to ~Rs2bn to the sales of the
company. Dabur has been marketing wide range of ethical products formulated with
natural plant extracts and ingredients which have been known since ages in India.
Dabur has re-launched ethicals range with focus on contemporary packaging and
communication. The company expanded the Ayurvedic medicines range with new
products for lifestyle ailments like Liver, Kidney stones, Hypertension and Prostate
enlargement. Dabur is using Television Media for Ashokarishta (Women Tonic) to
increase awareness and sales of this product. We expect Dabur to increase its
product range in the coming couple of years which would enable the company to
increase advertising spends and leverage its distribution.
Dabur’s OTC and ethical portfolio will also gain from 1) Project CORE, whereby, the
direct chemist reach has increased to 212000 and those under project CORE to
87047, an increase of 40000 and 38000 in one year 2) Project LEAD – Dabur
recruiting 275 medical representatives who would be focusing on the OTC and
ethical segment to increase its awareness among medical fraternity 3) New launches
in both OTC and ethicals portfolio. Dabur’s OTC and ethical portfolio has been
growing at 11% CAGR; we expect 15% sales CAGR over the coming few years.
January 04, 2016
11
Dabur India
Portfolio premiumisation is driving value
Dabur is steadily premiumising its portfolio across product categories. It is launching
new and value-added products across brands to increase product efficacy, remain
contemporary and increase usage of the products. Premium portfolio not only
boosts the sales but also the margins and sustainability in the long term. Dabur has
launched fruit variants, sugar free variant and Ratnaprash; we note that the most
expensive variant is 2x the price of base variant. Similarly, it has come a long way
from Dabur Amla centric hair oil portfolio. While the new launch of Keratex hair oil is
a niche product and is priced at 3x than Dabur Amla, other variants of Vatika and
Dabur Almond are priced at 20-30% premium. Non-Amla portfolio has grown to onethird of hair oil sales of Dabur.
In Toothpaste, Dabur has come a long way as Dabur Lal Dant Manjan now accounts
for just 19% of oral care sales as against ~50% ten years back. Babool Toothpaste
(economy segment) has seen its sales share decline from 35% in 2012 to 32% in
FY15; expect it to decline to 27% by FY18 as Dabur is reducing the sales of Rs10 pack
to improve profitability. Dabur is focused on increasing sales of Dabur Red and
Meswak which have grown sales by ~19% CAGR in the past 8-10 years.
Dabur has launched new delivery formats in Odonil fresheners; these include Gel,
Floral bouquet, spray and Pluggy. The realisation for a Pluggy is 3.5x than Odonil
block. The new innovations have improved the brand health and Odonil has grown at
23% CAGR in the past four years.
Dabur has also launched value-added variants and flavours in Hajmola, Shampoo,
Oxy bleaches, Beverages and CHD which aim at premiumisation of the portfolio and
higher profitability. We believe that new products will enable sustained sales and
profit growth in the coming years.
Exhibit 2:
DABUR is premiumising its portfolio across product segments
Chyawanprash (Rs/kg)
Hair Oils (Rs/100ml)
Toothpaste (Rs/200gm)
Odonil (Rs)
Fem (Rs/24g)
Special
295 Dabur Amla
46 Babool
46 Odonil Block
40 Anti Darkening Rose
33
Fruit Variants
300 Vatika Enriched
56 Dabur Red
88 Gel
75 Saffron Milk
54
Sugarfree
350 Dabur Almond
60 Meswak
90 Floral Bouquet
99 Gold Bleach
67
Ratnaprash
600 Vatika Olive
60
Spray
115 Oxy Bleach
80
136
Pluggy
135 Pearl and Milk
96
Keratex
2x
3x
2x
3.5x
3x
Source: Company Data, PL Research
January 04, 2016
12
Dabur India
Distribution expansion to increase sales in urban India
Dabur has one of the highest exposures to rural India in the listed consumer universe
as rural India accounts for nearly 45% of sales. The company has a distribution reach
of 5.3m retail outlets which is one of the highest among consumer companies. Dabur
has undertaken extensive plan to revamp its distribution which is aimed at 1) 4x
increase in direct rural reach by 2017 under “project double” 2) increase direct
chemist coverage for enhanced focus on OTC, ethicals and healthcare portfolio
under “Project CORE” 3) revamp of distribution in top 130 towns which account for
50% of urban consumption under Project 50/50 4) advocacy platform for OTC and
Ethical business by recruiting medical representatives under “Project LEAD” and 5)
separate front end teams for FMCG and healthcare portfolio (OTC and Ethicals).
Exhibit 3:
Dabur; distribution expansion across both urban and rural India
Project Double
• Rolled out in FY13 to expand direct coverage in rural markets
• Direct Village coverage has increased from 14000 villages in FY11 to 44,000 villages in FY15
• We plan to increase the coverage to 50,000 villages in FY16 and 60,000 in FY17
Project 50-50
• Aimed at leveraging the potential of Top 130 towns which contribute to 50% of urban
consumption
• Segregating the grocvery channel teams for wholesale & retail
• Initiative is in line with renewed focus on urban markets
Project Core
• To enhance chemist coverage and provide further impetus to our Health Care portfolio
• Direct Chemist Coverage is currently 213,000
• Strategy is to increase coverage and range for better throughput
Source: Company, PL Research
Project Double: Dabur rolled out “Project Double” to increase its rural footprint and
direct reach to villages with 3,000 plus population. The project has been rolled out in
10 key states of Uttar Pradesh, Rajasthan, Maharashtra, Orissa, Punjab, Madhya
Pradesh, Bihar, West Bengal, Assam and Karnataka that account for 72% of India’s
rural FMCG consumption. Direct coverage has increased from 14865 villages in
March 2011 to 44000 in March 2015. It plans to increase coverage to 50000 villages
in FY16 and 60000 villages in FY17. Project double will improve the efficiency and
depth of distribution it would be able to push better assortment of products which
otherwise won’t find its way into rural India.
January 04, 2016
13
Dabur India
Exhibit 4: Project Double: Direct rural reach is 3x since FY11
No of Villages
70000
60000
60000
30091
30000
17882
10000
14865
20000
FY11
FY12
50000
38250
40000
44128
50000
0
FY13
FY14
FY15
FY16E
FY17E
Source: Company, PL Research
Project Core: Dabur expects current recovery to be lead by urban growth and
launched Project CORE (Chemist outlet and range expansion) to expand its
distribution footprint in the chemist channel. It has increased its chemist coverage in
top 140 towns from 31385 in FY13 to 49000 in FY14 and to 87000 in FY15, with an
investment of Rs15 crore and aims to increase it to 125,000 chemists over the next
few years. Overall chemist coverage has increased from 172000 to 212000 during
the same period.
Exhibit 5: DABUR: Chemist channel expansion to boost sales in urban India
Direct Chemist
Project CORE
250000
212000
200000
172000
154000
150000
87047
100000
50000
31385
49186
0
FY13
FY14
FY15
Source: Company, PL Research
This channel has been provided with dedicated sales persons having hand held
devices and focus on OTC, ethicals and healthcare portfolio. Dabur is targeting 3035% sales growth from the chemist channel in focused products like Dabur Honitus,
Pudin Hara, Dabur lal tail, select OTC ethicals, health supplements such as,
Chyawanprash and select personal care products via this medium.
January 04, 2016
14
Dabur India
Project 50-50: Project 50-50 has been started on the premise that top 130 cities
account for 45% of urban population and 50% of urban consumption. It aims at
improving the distribution efficiencies as separate teams focus on wholesale and
retail channels. Retail teams will focus on increasing the reach and penetration;
wholesale teams will try to increase the depth of priority products and SKUs.
Project LEAD (Leveraging through Empowered Anchoring and Detailing): As a part of
this initiative, Dabur shall have two separate front end teams, one to manage the
OTC and Ethical healthcare business and the other for rest of the domestic FMCG
business. A medical detailing team has been built, 170 medical representatives have
been hired and will be taken up to 275 by the end of the fiscal. The initiative will
have annual cost of Rs100-120m. A head of business has been inducted for doctor
detailing and marketing, it is in line with the focus on healthcare as an important
driver of growth and will help establish a good connect with the healthcare
fraternity. Dabur will back the initiative with ad-spends on case-to-case basis.
January 04, 2016
15
Dabur India
Patanjali: emerging challenger in Consumer care?
Patanjali Ayurved, backed by Yoga Guru Baba Ramdev, has stormed the consumer
goods space by entering a host of product categories in the past few years. It has
seen huge success with FY15 sales being more than Rs20bn and a target of Rs50bn
sales in FY16. Patanjali has been able to create an impact based on the goodwill of
Baba Ramdev, attractive pricing and herbal and natural positioning of products.
Patanjali has lower pricing (10-20%) for most products in comparison to competing
brands even as it has EBITDA margins exceeding 20%.
Exhibit 6: Patanjali shown high sales and profit growth
DESCRIPTION (Rs m)
Mar-12
Mar-13
Mar-14
Net Sales
4,512
8,439
11,867
Gross Profit
2,785
4,062
5,673
Gross Margin (%)
EBITDA
EBITDA Margin (%)
Other Income
61.7
48.1
47.8
1,375
1,518
2,393
30.5
18.0
20.2
27
51
79
Interest
362
287
180
Depreciation
338
330
314
Profit Before Taxation
702
952
1,978
Tax
143
196
416
20.4
20.6
21.0
Tax Rate (%)
Adj. PAT
559
756
1,562
Adjusted EPS
13.6
18.4
37.8
Source: Company Data, PL Research
Exhibit 7: Patanjali has little debt and working capital requirement
DESCRIPTION (Rs m)
Mar-12
Mar-13
Mar-14
EQUITY AND LIABILITIES
Share Capital
Shareholder's Funds
Long-Term Borrowings
Short Term Borrowings
411
411
413
1,611
2,285
3,986
998
687
345
858
1,042
1,184
Loans Funds
1,855
1,729
1,529
Total Liabilities
3,570
4,122
5,626
2,790
2,775
2,681
ASSETS
Total Non-Current Assets
Cash and Bank
Net Current assets (excluding cash)
Total Assets
51
41
541
729
1,307
2,404
3,570
4,122
5,626
Source: Company Data, PL Research
January 04, 2016
16
Dabur India
Distribution tie-up with Future Group: Patanjali Ayurved (PAL) has been selling the
products mainly through its franchisee stores and some of the online portals. PAL
has entered into a marketing tie-up with Future Group which has more than 920
modern retail stores spread across the country under brands like Big Bazaar, Food
Bazaar, Easy Day, KB’s, Aadhar and Niligiri’s. Big Bazaar has introduced a host of
products like Shampoo, toothpaste, Biscuits, Jams, Fruit Conserves, Oats, Cornflakes,
Ayurvedic Juices, Chyawanprash, Honey, Badam Pak, Spices, Face wash, Soaps,
Detergent cakes and bar, hair oils etc. We believe presence in largest modern trade
footprint will increase competition for incumbents in select FMCG products.
Patanjali enters diverse product categories: Patanjali, which started with
manufacturing and marketing of Ayurvedic products, has come a long way and
entered host of FMCG products. Patanjali has wide presence in processed foods,
cooking aids, and HPC segments (Home and Personal care). Food products through
branded Atta, Spices, Ghee, Biscuits, Jams, and Fruit conserve, pickles, pulses, salt,
Mustard oil, Oats, Cornflakes, Noodles, Honey and Chyawanprash. Patanjali has
presence in home and personal care with Detergents, Bathing and washing soaps,
dishwash, Shampoo, skin creams, face wash, hair oils, shave gel, hair colour etc.
While Patanjali has created a niche for itself in certain herbal products, it is entering
too many product categories at a time. Although it has right to win in Ayurvedic
products, lack of focus might become a liability after a while.
Advertising to increase awareness: Patanjali has built the brand on the goodwill of
Baba Ramdev and positive word of mouth by the consumers. It has also started
focusing on the brand building and advertising. Patanjali started advertising with
Biscuits and has extended it to Desi Ghee, Shampoo, Amla and Aloe Vera Juice and
Honey. We believe that the company will extend advertising to several niche
segments in HPC and foods. We believe that rising awareness, distribution and
marketing/advertising can increase demand for Patanjali products in the near term.
Patanjali competes with 55% of Dabur’s domestic sales: Patanjali has presence in
hair Oils, Toothpaste, Chyawanprash, shampoo and Honey which are 55% of Dabur’s
sales. Patanjali has 15-30% lower prices than Dabur in most of the competing
segments. Aggressive pricing of Patanjali products will expand the market for these
products but it has the potential to impact sales of incumbents.
Patanjali products competing with Dabur
January 04, 2016
17
Dabur India
We believe that Dabur is the most vulnerable in categories like Honey, Shampoo and
Amla-based hair oils. Toothpaste is likely to feel less impact as Dabur has just 13%
share in the toothpaste market. The company seems confident of protecting its turf
given the premium positioning, huge distribution advantage and long standing
association with consumers. We believe that rising distribution of Patanjali can
increase consumer shift towards natural and herbal products. However, it remains to
be seen whether Patanjali would eat into the market share of natural/herbal product
makers (Dabur, Emami and Himalaya) or others (HUVR, Colgate, Godrej, L’Oreal,
Marico etc).
Exhibit 8:
Patanjali has 15-30% lower prices than Dabur; Himalaya has 20-100% higher pricing than Dabur
Segment
Honey
SKU
500 gm
180ml
Dabur's
Sales %
4.8
4.0
Price (Rs) Brand
Patanjali Honey
135
Patanjali Litchi Honey
165
Price (Rs)
Himalaya Honey
332
Daily Gentle
140
118
Kesh Kanti Reetha
85
Anti Hairfall
140
200ml
129
95
190ml
Dabur Almond
116
Milk Protein/ Shikakai
Kesh Kanti Anti
Dandruff
110
Anti Dandruff
140
Dabur Amla
84
Patanjali Amla
72
Hair oil - anti
Hairfall
180
Dabur Anmol Coconut
41
Patanjali Coconut
Hair oil
46
Vatika Coconut
84
100ml
Dabur Almond
60
Patanjali Almond Oil
50
Hair oil - anti
Dandruff
120
100ml
Vatika Almond
58
Babool
72
Patanjali Dant Kanti
75
Complete Care
91
200gm
Dabur Red
85
Patanjali Medicated
200gm
Meswak
82
200gm
19.3
13.8
100gm
500gm
8.2
500gm
450gm
Gulab Jal
199
75
Hair Oil
Chyawanprash
Price (Rs) Brand
Patanjali Kesh Kanti
150ml
Toothpowder
Dabur Honey
Himalaya
121
180ml
Toothpaste
Brand
Patanjali
Vatika Henna and Olive
Vatika Lemon Henna/
Tea Tree oil
Vatika B&B
180ml
Shampoo
Dabur
120ml
1.9
Lal Dant Manjan
35
Chyawanprash
160
Chawyanprakash
170
Ratanprash
260
Gulabari
38
Patanjali Dant
Manjan
Chyawanprash
115
Patanjali Gulab Jal
25
Dental Cream
80
Sparkling White
Sensitive
Toothpaste
104
Chyawanprash
263
180
50
Source: Company Data, PL Research
January 04, 2016
18
Dabur India
IBD: acquisitions unlikely, expect gradual recovery
IBD has been growing sales at 15% CAGR and EBITDA has grown at 16.5% CAGR over
past three years as margins have expanded by 40bps during the period. Dabur has
developed most of the international business organically and has done only two
major acquisitions i.e. Namaste and Hobi. Middle East is the largest part and
contributes 32% to sales. Asia is 17% of sales driven by Dabur Nepal, Pakistan and
Bangladesh. Dabur’s growth in international business has seen strong impact from 1)
currency fluctuations 2) political instability in Middle East and 3) business changes in
Namaste.
Exhibit 9: Middle East and Namaste key to growth acceleration
Europe
12
Middle East
32
America
16
Asia
17
Africa
23
Source: Company Data, PL Research
Hobi Kozmetik (Turkey): Hobi has seen decline in EBITDA margins from 11.8% in
FY13 to 2.1% in FY15 despite strong sales growth due to rising cost of imports due to
weak currency. Hobi business has grown by 22% in constant currency terms in
Q2FY16; however, the currency translation has resulted in flat sales. Dabur is taking
steps to improve profitability; however, visibility on achieving double-digit margins
remains poor.
Middle East: It contributes 32% to IBD sales with major presence in UAE, Saudi
Arabia, Kuwait and Oman. Dabur has presence in hair care (hair oils, hair creams,
hair gels, Shampoo and conditioners), skin care (soaps, hand wash, skin creams and
lotions) and oral care (Dabur herbal and Meswak toothpaste). Dabur has leadership
in hair oils and creams/gels in UAE and Saudi Arabia. The performance has bottomed
out and recovery is expected in the coming quarters. However, political stability will
remain an important determinant of growth in this region.
January 04, 2016
19
Dabur India
Namaste has been under pressure since FY13, its EBITDA has declined from Rs834m
to Nil in FY15. FY15 sales of Namaste were 17% lower than the sales in FY12 as the
company had undertaken distribution revamp and price correction. North American
business has staged a strong revival and grew by 20% in Q2FY16 (Overall growth 8%)
as the benefits of business restructuring have started flowing in. The Africa business
is still underperforming as devaluation of currencies has lead to 40-60% increase in
product prices impacting demand in markets like South Africa, Nigeria and Kenya.
However, revival in US growth augurs well for Namaste as it has higher margins in
this territory. Namaste will start production at its Africa unit in Q3 which will lower
costs and impact of currency depreciation. Margins in Namaste are likely to increase
significantly as it has more than 50% gross margins. Namaste had mid-teen margins
by FY12; Dabur expects margins to come back to double digits in FY17. We estimate
Namaste’s EBITDA to increase to Rs199m in FY16 and Rs896m in FY18.
Africa contributes 23% to IBD sales and has presence in Hair care (Oils, hair creams
and shampoo), oral care and Namaste range of hair care products under ORS brand.
It has strong presence in South Africa, Nigeria, Egypt and Kenya. It has leadership in
hair oils and hair creams. It has shifted from outsourced distribution to own
distribution in Nigeria and set up in unit in Ras-Al–Kamiah to supply to Middle East
and Namaste range of products in Africa. Dabur also expanded reach in new markets
in Africa. Namaste range of ethnic hair care products hold key to sales and profit
growth in this region.
South Asia: South Asia has businesses in Nepal, Sri Lanka, Pakistan and Bangladesh.
Dabur Nepal is one of the key businesses overseas and contributes sales of Rs5.9bn
and EBITDA of Rs718m. Dabur Nepal is one of the key manufacturing locations of
Real and Activ fruit juices for the domestic operations. Nepal business has been hit
by an earthquake in early 2015 and political and social unrest currently. This is
expected to have adverse impact on the performance from this subsidiary in FY16.
Medium term outlook remains intact and it can grow at low to mid teens.
Bangladesh and Pakistan have sales of Rs1.4bn and EBITDA of Rs177m. Dabur has
recently started manufacturing operations in Bangladesh with a unit for Hair oils,
Shampoo, Toothpaste, Dabur Honey and Odonil. Odonil and Toothpaste has been
launched in the market and has evoked good response. Dabur has started fruit juice
unit in Sri Lanka and is also marketing honey, Sanifresh, Odonil, hair oils and
Shampoos.
IBD has posted 16.5% EBIDTA CAGR in the past three years as Hobi and Namaste
have been a drag. However, the performance is likely to show an improvement,
given that Namaste has started recovering in USA and Africa should also start
reporting higher margins from by Q4FY16. MENA region performance seems
bottomed out; however, the volatile political and social conditions remain a key risk.
We estimate 23.5% EBITDA CAGR mainly led by recovery in Namaste.
January 04, 2016
20
Dabur India
Exhibit 10: IBD to bounce back in FY17; Namaste to be the key growth driver
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
5,056
6,463
8,824
10,826
12,558
14,568
16,898
44.2
27.8
36.5
22.7
16.0
16.0
16.0
738
956
1,499
1,927
2,298
2,622
2,999
Margin (%)
14.6
14.8
17.0
17.8
18.3
18.0
17.8
Growth (%)
49.5
29.5
56.8
28.6
19.2
14.1
14.4
4,284
4,621
5,411
5,876
6,547
7,529
8,659
31.0
7.9
17.1
8.6
11.4
15.0
15.0
322
514
658
718
874
990
1,121
Margin (%)
7.5
11.1
12.2
12.2
13.4
13.2
13.0
Growth (%)
12.3
59.6
28.0
9.2
21.7
13.3
13.3
5,483
4,905
5,798
4,524
4,976
5,723
6,638
373.4
(10.5)
18.2
(22.0)
10.0
15.0
16.0
Dabur Int
Sales
Growth (%)
EBIDTA
Dabur Nepal
Sales
Growth (%)
EBIDTA
Namaste
Sales
Growth (%)
EBIDTA
834
374
167
0
199
601
896
Margin (%)
15.2
7.6
2.9
0.0
4.0
10.5
13.5
Growth (%)
352.3
(55.1)
(55.4)
(99.8)
49,661.8
201.9
49.1
1,546
1,916
2,296
2,854
3,282
3,774
4,341
51.8
23.9
19.8
24.3
15.0
15.0
15.0
275
427
497
604
722
804
922
Margin (%)
17.8
22.3
21.7
21.2
22.0
21.3
21.3
Growth (%)
38.7
54.9
16.5
21.5
19.6
11.3
14.7
1,102
1,418
1,586
1,990
2,069
2,318
2,596
166.2
28.6
11.8
25.5
4.0
12.0
12.0
Dabur Egypt
Sales
Growth (%)
EBIDTA
Hobi Kozmetik
Sales
Growth (%)
EBIDTA
66
168
88
42
72
127
195
Margin (%)
6.0
11.8
5.6
2.1
3.5
5.5
7.5
Growth (%)
20.7
154.3
(47.5)
(52.0)
71.6
76.0
52.7
647
1,140
1,497
1,399
1,567
1,802
2,127
44.0
76.0
31.3
(6.5)
12.0
15.0
18.0
28
145
165
177
234
269
298
Asian Consumer
Sales
Growth (%)
EBIDTA
Margin (%)
4.3
12.7
11.0
12.6
15.0
14.9
14.0
Growth (%)
72.0
424.6
13.8
7.6
32.4
14.6
10.9
14,969
17,504
21,233
22,934
24,767
28,595
33,032
88.9
16.9
21.3
8.0
8.0
15.5
15.5
IBD
Sales
Growth (%)
EBIDTA
2,256
2,625
3,152
3,568
4,549
5,637
6,749
Margin (%)
15.1
15.0
14.8
15.6
18.4
19.7
20.4
Growth (%)
73.7
16.3
20.1
13.2
27.5
23.9
19.7
Source: Company Data, PL Research
January 04, 2016
21
Dabur India
Estimate 18.5% PAT CAGR over FY15-18, BUY
Dabur has been one of the most diversified FMCG companies which has posted a
Sales and Adj PAT growth of 13% for standalone business and 16.5% for consolidated
business in the past five years. Dabur’s growth has been mostly organic with just
three acquisitions (Fem, Namaste and Hobi Kozmetik) in the past 10 years. Consumer
care business in India accounts for 66% of sales, while international business is 31%
and others is 3% of sales.
Exhibit 11: Consumer care: portfolio width is a huge advantage
Exhibit 12: IBD is 31% of sales
Health
Supplements
18
Food
19
Others
3
Digestives
6
Home care
6
International
31
OTC &
Ethicals
9
hair Care
23
India Consumer
Care
66
Skin Care
5
Oral care
14
Source: Company Data, PL Research
Source: Company Data, PL Research
Exhibit 13: Standalone: 16% CAGR over FY16-18 buoyed by margin expansion in FY16 (Rs m)
Y/e March
FY14
FY15
FY16E
FY17E
FY18E
48,701
54,313
60,584
68,955
78,524
12.0
11.5
11.5
13.8
13.9
8,256
9,385
11,174
13,089
15,053
EBIDTA Margin (%)
17.0
17.3
18.4
19.0
19.2
EBIDTA Growth (%)
14.2
13.7
19.1
17.1
15.0
194
99
25
23
23
Net Sales
Growth (%)
EBIDTA
Interest
Depreciation
539
660
710
782
854
PBT from Operations
7,524
8,626
10,440
12,284
14,177
Other Income
1,097
1,379
1,842
1,946
2,167
Profit before Tax
8,620
10,005
12,282
14,230
16,343
Tax
1,892
2,140
2,763
3,273
3,759
PAT
6,728
7,865
9,519
10,957
12,584
13.8
16.9
21.0
15.1
14.8
3.9
4.5
5.4
6.2
7.1
Growth (%)
EPS (Rs)
Source: Company Data, PL Research
We expect standalone sales to grow by 13% CAGR over FY15-18 driven by high single
digit volume growth. FY16 performance will be driven by 110bps margin expansion
as Dabur will show full benefits of lower input costs. We expect sales growth of ~14%
over the coming two years led by demand revival, distribution expansion and
revamp of product portfolio. We estimate 16% PAT CAGR; however, we estimate
subdued growth post FY16 as higher base would limit margin expansion.
January 04, 2016
22
Dabur India
Exhibit 14: Consol Sales and PAT to grow at 16% and 18% over FY15-18 (Rs m)
Y/e March
Net Sales
Growth (%)
EBIDTA
FY14
FY15
FY16E
FY17E
FY18E
70,753
78,272
86,489
98,907
113,155
14.7
10.6
10.5
14.4
14.4
11,598
13,164
15,373
18,179
21,144
EBIDTA Margin (%)
16.4
16.8
17.8
18.4
18.7
EBIDTA Growth (%)
17.4
13.5
16.8
18.2
16.3
Interest
542
401
324
217
182
Depreciation
975
1,150
1,209
1,295
1,387
10,082
11,613
13,840
16,666
19,575
PBT from Operations
Other Income
Profit before Tax
Tax
PAT
Growth (%)
1,281
1,581
2,259
2,734
3,367
11,363
13,194
16,099
19,400
22,941
2,191
2,509
3,220
4,123
5,162
9,146
10,658
12,850
15,246
17,744
19.1
16.5
20.6
18.6
16.4
5.2
6.1
7.3
8.6
10.0
EPS (Rs)
Source: Company Data, PL Research
We estimate consolidated sales to grow at 13% CAGR, impacted by political
uncertainty in Middle East and currency depreciation. EBITDA margins will expand by
100bps in FY16 and 50bps over the coming two years. IBD margins would be driven
by stabilization of profits in Namaste. We estimate 18% PAT CAGR over FY15-18.
Dabur has track record of steady profit growth, ROE of 30% and dividend payout in
mid thirties. Working capital is just 1.9% of sales ensuring strong free cash flows.
DABUR is trading at 30x Dec2017 EPS of Rs9.5. We value the stock at 33xDec17 EPS
and arrive at target price of Rs318. Initiate coverage with ‘BUY’.
Exhibit 15: Dabur trades at a premium to MRCO and Emami due to sustained track record of profitable growth
Emami
Hindustan Unilever
Marico
Dabur
FY16E
FY17E
FY18E
FY16E
FY17E
FY18E
FY16E
FY17E
FY18E
FY16E
FY17E
FY18E
Sales Growth (%)
23.8
18.1
16.5
7.8
14.1
14.8
7.6
14.5
14.5
10.5
14.4
14.4
EBITDA Growth (%)
46.3
18.7
17.0
9.0
18.8
21.3
21.9
19.3
15.9
16.8
16.1
15.8
PAT Growth (%)
-5.5
12.9
31.7
5.3
17.7
21.8
23.3
21.8
17.5
20.4
16.7
16.1
ROE (%)
33.6
31.5
34.4
108.6
123.1
124.6
31.2
30.9
29.6
31.3
30.6
29.6
ROCE (%)
42.4
41.1
48.1
158.8
179.8
180.9
46.4
46.8
45.5
34.2
35.7
35.7
P/E (x)
49.0
43.4
32.9
46.4
39.4
32.4
40.8
33.5
28.5
37.9
32.6
27.6
EV/EBITDA (x)
29.1
24.0
19.9
31.7
26.6
21.8
26.7
22.0
18.6
30.7
25.5
21.5
Dividend payout (%)
41.7
44.9
44.1
83.9
80.5
71.7
37.3
39.4
37.3
34.3
34.2
34.7
Tax rate (%)
15.0
20.0
20.5
31.4
31.4
31.0
30.0
30.5
31.0
20.0
21.3
22.5
Source: Company Data, PL Research
January 04, 2016
23
Dabur India
Exhibit 16: ROE: Impacted by Lower returns in Namaste and Hobi
Exhibit 17: ROCE remains steady
ROE
50.0
45.8
50.0
39.0 36.9
35.2
40.0
30.0
20.0
38.3
40.0
32.8 31.3 30.6
29.6
(%)
(%)
ROCE
10.0
35.7 35.7
32.8 33.6 34.2
30.1 30.4
30.0
20.0
10.0
0.0
0.0
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Source: Company Data, PL Research
Source: Company Data, PL Research
Exhibit 18: Inventory reduction lowers working capital requirement
Exhibit 19: Dividend payout remains in 38-41% range
Networking capital/ sales
6.0
4.6
4.4
5.0
Dividend payout ratio
42.0
5.0
41.0
3.0
2.2
2.5
2.0
1.1
1.6
1.9
(%)
(%)
4.0
41.2
41.0 40.9
40.4
39.6
40.0
38.9 38.9
39.0
38.0
1.0
0.0
37.0
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Source: Company Data, PL Research
Source: Company Data, PL Research
Exhibit 20: Inventory down both for raw materials and finished goods
Exhibit 21: Debtors days remain steady
Inventory days
200
40.8
189
Debtor days
40
175
143
150
141
32
127
127
130
132
30
100
20
50
10
0
32
35
33
33
33
33
29
0
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Source: Company Data, PL Research
January 04, 2016
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Source: Company Data, PL Research
24
Dabur India
Dabur H1FY16; Margin expansion led profit growth; Foods and currency depreciation retard growth
12.3
2.0
Sep-13
Sep-15
Jun-15
Mar-15
Sep-14
Dec-14
June-14
Mar-14
Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Sep-12
-
50.6
15.6
16.7
14.3
53.2
52.5
53.4
56.9
18.2
16.9
17.8
15.5
Jun-15
4.0
51.5
Mar-15
5.0
6.0
51.4
Dec-14
7.4
8.0
54.0
60.0
50.0
40.0
30.0 18.8
20.0
10.0
0.0
8.1 8.1
Sep-14
(%)
9.0 9.2 8.8 8.7
9.0
EBITDA Margins (%)
Jun-14
9.0 9.5
10.0
Gross Margins (%)
10.7
Mar-14
12.0
Dec-13
14.0
Exhibit 23: Gross Margins up 190bps, EBITDA, up 110bps
55.1
19.3
Sep-15
Exhibit 22: Poor demand and Foods business impacts volume growth
Source: Company Data, PL Research
Source: Company Data, PL Research
Exhibit 24: Sales tepid, margin expansion accelerates PAT Growth
Dabur’s H1 performance is driven by margin expansion. Nepal
issues and shift of Diwali to Q3 has impacted food business sales.
Shampoo has been impacted by price cuts by P&G and HUL in the
category. Oral care, hair oils and home care have been major
growth drivers. Health Supplements and OTC have posted steady
growth. IBD has seen impact of currency depreciation in Turkey
and political uncertainty in Middle East. Namaste is recovering
and should report much better performance in coming quarters.
23.4
10.0
14.9 15.0
18.7
10.7
12.9
10.0
8.9
Jun-14
Mar-14
Dec-13
16.4
14.6
5.0
Sep-13
15.1
13.3
9.9
Jun-15
15.0
16.5
Dec-14
16.8
Sep-14
20.0
23.9
21.0
Mar-15
25.0
PAT Growth (% YoY)
8.7
Sep-15
Sales Growth (% YoY)
Source: Company Data, PL Research
Exhibit 25: Hair oils, Oral care and Home care boost growth; Foods, Digestive and Shampoo a big drag
Category Growth (%)
Hair Care
Hair Oils
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
4.0
7.0
6.0
8.4
13.9
12.1
7.4
12.7
9.4
6.5
5.0
10.0
7.1
0.0
12.0
7.4
13.0
14.0
13.0
25.0
19.0
15.3
0.0
12.8
8.0
11.5
0.0
Health Supplements
16.8
19.5
18.0
21.6
10.1
13.5
13.0
1.2
9.0
Oral Care
18.7
10.4
17.3
8.0
8.1
11.3
11.6
17.5
18.7
16.5
14.3
21.0
10.7
11.5
19.0
0.0
23.8
28.1
Foods
22.0
18.0
21.0
21.6
29.0
11.8
19.6
15.5
2.4
Digestives
11.9
17.7
23.3
11.3
12.3
11.6
11.0
1.7
1.6
Skin care
17.4
13.4
10.1
4.4
9.7
4.0
16.6
5.2
2.2
Home Care
25.3
16.0
13.0
14.7
10.2
16.2
12.1
12.0
12.4
OTC & Ethicals
11.2
13.2
11.0
4.4
7.5
8.8
7.7
16.7
10.8
Shampoos
Toothpaste
Source: Company Data, PL Research
January 04, 2016
25
Dabur India
Exhibit 26: IBD: Organic growth tepid as GCC, MENA and Bangladesh disappoints
IBD Sales Growth (%)
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
25.8
26.0
20.0
18.0
8.3
3.6
8.8
9.2
8.8
Egypt
23.0
16.0
NA
28.0
28.0
29.0
21.0
NA
NA
GCC
17.0
21.0
NA
21.0
24.0
14.0
22.0
10.0
9.0
NA
NA
NA
NA
NA
17.0
21.0
22.2
NA
Bangladesh
24.0
10.0
NA
NA
NA
16.0
18.0
7.3
2.7
Nepal
16.0
NA
NA
NA
NA
NA
NA
14.4
15.3
Organic- Constant Currency
Levant
Source: Company Data, PL Research
Exhibit 27: One year forward Price to Earnings
P/E (x)
Avg(x)
27.8
Median(x)
Min(x)
33.4
37.9
27.4
9.3
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Peak(x)
Source: Company Data, Bloomberg, PL Research
January 04, 2016
26
Dabur India
Income Statement (Rs m)
Y/e March
Net Revenue
Raw Material Expenses
Gross Profit
Employee Cost
Other Expenses
EBITDA
Depr. & Amortization
Net Interest
Other Income
Profit before Tax
Total Tax
Profit after Tax
Ex-Od items / Min. Int.
Adj. PAT
Avg. Shares O/S (m)
EPS (Rs.)
Cash Flow Abstract (Rs m)
Y/e March
C/F from Operations
C/F from Investing
C/F from Financing
Inc. / Dec. in Cash
Opening Cash
Closing Cash
FCFF
FCFE
Key Financial Metrics
Y/e March
Growth
2015
2016E
2017E
2018E
78,272
37,201
41,071
6,896
21,012
13,164
1,150
401
1,581
13,194
2,509
10,685
26
10,658
1,756.5
6.1
86,489
39,887
46,601
7,648
23,580
15,373
1,209
324
2,259
16,099
3,220
12,879
29
12,850
1,761.5
7.3
98,907
45,738
53,169
8,594
26,396
18,179
1,295
217
2,734
19,400
4,123
15,278
32
15,246
1,766.5
8.6
113,155
52,621
60,534
9,733
29,658
21,144
1,387
182
3,367
22,941
5,162
17,780
35
17,744
1,771.5
10.0
2015
2016E
2017E
2018E
9,595
(8,957)
(3,093)
(2,455)
3,132
677
9,454
9,708
12,575
(6,280)
(4,763)
1,531
678
2,209
14,317
11,231
12,960
(8,724)
(3,553)
682
2,208
2,891
14,183
13,433
15,235
(10,784)
(4,022)
429
2,891
3,320
16,814
16,314
2015
2016E
2017E
2018E
Revenue (%)
EBITDA (%)
PAT (%)
EPS (%)
10.6
13.5
16.5
15.7
10.5
16.8
20.6
20.2
14.4
18.2
18.6
18.3
14.4
16.3
16.4
16.1
16.8
13.6
33.6
32.8
17.8
14.9
34.2
31.3
18.4
15.4
35.7
30.6
18.7
15.7
35.7
29.6
0.2
21
—
14
—
16
—
18
45.6
14.5
37.4
6.3
37.9
11.8
31.8
5.7
32.0
9.7
26.9
4.9
27.6
8.1
23.1
4.3
19.0
12.0
4.5
91.1
20.0
14.0
4.5
87.4
21.3
14.1
4.4
88.1
22.5
14.7
4.5
91.9
Profitability
EBITDA Margin (%)
PAT Margin (%)
RoCE (%)
RoE (%)
Balance Sheet
Net Debt : Equity
Net Wrkng Cap. (days)
Balance Sheet Abstract (Rs m)
Y/e March
Shareholder's Funds
Total Debt
Other Liabilities
Total Liabilities
Net Fixed Assets
Goodwill
Investments
Net Current Assets
Cash & Equivalents
Other Current Assets
Current Liabilities
Other Assets
Total Assets
Quarterly Financials (Rs m)
Y/e March
Net Revenue
EBITDA
% of revenue
Depr. & Amortization
Net Interest
Other Income
Profit before Tax
Total Tax
Profit after Tax
Adj. PAT
2015
2016E
2017E
2018E
33,541
7,336
769
41,646
19,274
—
20,217
2,155
678
20,894
19,417
—
41,646
41,134
4,250
856
46,241
19,712
—
24,850
1,678
2,208
22,579
23,109
—
46,240
50,257
3,500
953
54,710
20,417
—
31,574
2,718
2,891
25,801
25,973
—
54,709
60,793
3,000
1,059
64,852
21,030
—
40,358
3,465
3,320
29,491
29,346
—
64,852
Q3FY15
Q4FY15
Q1FY16
Q2FY16
20,790
3,519
16.9
309
95
386
3,500
663
2,828
2,828
19,497
3,457
17.7
282
103
447
3,519
670
2,847
2,848
20,695
3,218
15.5
326
117
479
3,253
632
2,611
2,611
20,962
4,045
19.3
329
124
547
4,140
728
3,411
3,411
2015
2016E
2017E
2018E
11.5
13.7
7,865
16.9
4.5
11.5
19.1
9,519
21.0
5.4
13.8
17.1
10,958
15.1
6.2
13.9
15.0
12,584
14.8
7.1
8.6
12.3
2,942
14.3
1.7
8.2
17.2
3,328
13.1
1.9
15.6
24.1
4,218
26.8
2.4
15.6
19.9
5,123
21.4
2.9
Key Operating Metrics
Y/e March
Standalone
Sales growth %
EBITDA growth %
Adj. PAT
Adj. PAT growth %
EPS
Subsidiaries
Sales growth %
EBITDA growth %
Adj. PAT
Adj. PAT growth %
EPS
Source: Company Data, PL Research.
Valuation
PER (x)
P / B (x)
EV / EBITDA (x)
EV / Sales (x)
Earnings Quality
Eff. Tax Rate
Other Inc / PBT
Eff. Depr. Rate (%)
FCFE / PAT
Source: Company Data, PL Research.
January 04, 2016
27
Dabur India
Prabhudas Lilladher Pvt. Ltd.
3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India
Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
Rating Distribution of Research Coverage
% of Total Coverage
50%
PL’s Recommendation Nomenclature
47.2%
40.6%
40%
30%
20%
12.3%
10%
0.0%
0%
BUY
Accumulate
Reduce
Sell
BUY
:
Over 15% Outperformance to Sensex over 12-months
Accumulate
:
Outperformance to Sensex over 12-months
Reduce
:
Underperformance to Sensex over 12-months
Sell
:
Over 15% underperformance to Sensex over 12-months
Trading Buy
:
Over 10% absolute upside in 1-month
Trading Sell
:
Over 10% absolute decline in 1-month
Not Rated (NR)
:
No specific call on the stock
Under Review (UR)
:
Rating likely to change shortly
DISCLAIMER/DISCLOSURES
ANALYST CERTIFICATION
We/I, Mr. Amnish Aggarwal (MBA, CFA), Mr. Gaurav Jogani (MBA, Bcom), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report.
Terms & conditions and other disclosures:
Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as “PL”) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for third party financial products. PL is a
subsidiary of Prabhudas Lilladher Advisory Services Pvt Ltd. which has its various subsidiaries engaged in business of commodity broking, investment banking, financial services (margin funding) and distribution of third
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This document has been prepared by the Research Division of PL and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to
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Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his
or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
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The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal
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This report is intended for distribution by Prabhudas Lilladher Pvt. Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and
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Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer.
January 04, 2016
RADHAKRISHNA
N SREESANKAR
Digitally signed by RADHAKRISHNAN SREESANKAR
DN: c=IN, o=Personal, cn=RADHAKRISHNAN
SREESANKAR,
serialNumber=8859da2df03122989b585ad520865a
4f59be69fbc1b7ba2c5315941f987f41de,
postalCode=400104, st=MAHARASHTRA
Date: 2016.01.04 12:36:07 +05'30'
28