BUY SUHANI ADILABADKAR RESEARCH REPORT Q2 FY18

DABUR INDIA LTD CONSOLIDATED

QUARTERLY OUTLOOK & RECOMMENDATION DABUR India Ltd reported spectacular sequential growth for the September quarter FY18 but with mild yearly numbers. Revenue or Income From Operations fell 1% YOY at Rs. 19589 Mn in September quarter against Rs. 19816 Mn same period previous year. Sequential growth was reported at 9% in September quarter driven by 10% domestic & volume growth of 7.2% with international business growing at 3.9% in constant currency. Domestic & international business contributed 68% & 29% respectively in September quarter FY18. EBDITA grew 1% and stood at Rs. 5042 Mn against Rs. 4979 Mn corresponding quarter previous year. On quarterly basis EBDITA growth was 29% in Q2 FY18. Profit After Tax grew 37% QOQ at Rs. 3627 Mn against Rs. 3584 Mn corresponding quarter previous year with yearly growth of just 1%. Operating Expenditure declined 2% YOY from Rs. 15730 Mn in Q2 FY17 to Rs. 15390 Mn in September quarter FY18. Other expenditure fell from 12.1% of sales to 10.8% of sales on the back of cost synergies and declined 12% YOY supporting expenditure degrowth. On quarterly basis, operating expenditure jumped 4% QOQ in Q2 FY18. EBDITA margin expanded 394 basis points QOQ and 61 basis points yearly at 25.74% in the current quarter. Net Profit Margin too followed suit, rising 372 basis points sequentially and 43 basis points YOY. Net Profit Margin was reported at 18.51% against 18.08% same period previous quarter. Taxation was almost constant at Rs. 880 Mn where as finance costs declined 20% and were reported at Rs. 133 Mn YOY buttressing the bottom-line. Depreciation on the other hand jumped 12% at Rs. 401 Mn in September quarter. Other Income fell 6% YOY and rose 4% on quarterly basis. Other Income was reported at Rs. 843 Mn compared to Rs.893 Mn corresponding quarter previous year. Dabur India Ltd is one of the most trusted Indian brand and world’s largest Ayurvedic and Natural Health Care Company. Dabur operates in key consumer product categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The company has wide distribution network of about 6 million retail outlets in both urban and rural markets. The company’s revenue basket is broadly divided into consumer care, food & retail business. Consumer care business contributing 83% of total revenues de-grew 2% YOY with positive sequential growth of 13% in the September quarter. Food business contributes the next biggest chunk of about 14% exhibiting 5% YOY growth. Retail business reported negative growth both yearly & sequentially. Consumer Care, Food & Retail revenues were reported at Rs 16147 Mn, Rs. 2828 Mn & Rs. 265 Mn respectively in September FY18. DABUR Ltd has weathered GST disruption and is expected to perform better with an uptick in the domestic rural economy and global growth. The company has collaborated with Amazon to increase its online and overseas presence and aims to double its ecom volumes which are currently about 1.5% of domestic sales. The company has improved its bottom-line in September quarter with strong volume growth of 7% without any beneficial restocking impact. With respect to product category, Real juices witnessed margin improvement with market share of 55% in Q2 FY18, Dabur Honey grew by 8.6% reversing the declining trend of previous quarters and oral care growth was around 23%. Dabur seems to have stabilized its business model and is expected to take competition head on in the coming quarters. We recommend BUY for the stock for medium & long term investment with target price of Rs. 550 and PE multiple of 45.62 x FY18E & 42.96 x FY19E.

CMP

Rs. 358.65

TARGET

Rs.550.00

INDUSTRY

PERSONAL PRODUCTS

SCRIP CODE

500096

FACE VALUE

Rs.1.00

MARKET Rs. 631762 Mn CAP 52 WEEK Rs.362.00 /Rs.263.10 HIGH/LOW SHAREHOLDING PATTERN (%) 68.05 PROMOTER PUBLIC 31.95 OTHERS TOTAL 100.00 Q2 FY18 Q2 FY17 CHN% In Mn REVENUE 19589.30 19816.20 -1% PAT

3626.70

3583.50

1%

EBDITA EPS

5042.20

4979.20

1%

2.06

2.03

1%

FY17A

FY18E

FY19E

REVENUE

77014.40

79324.83

83291.07

PAT

12803.10

13848.56

14707.03

EBDITA

18072.90

19484.29

20458.51

EPS

7.27

7.86

8.35

PE

49.34

45.62

42.96

In Mn

DABUR LTD V/S S&P BSE SENSEX

PERFORMANCE METRICS (September Quarter FY18) Profitability Analysis EBDITA (Rs. In Mn)

REVENUE GROWTH (Rs. In Mn) 20000

19816

19589

Q2 FY18

5042

19500 19147 Q1 FY18

19000 18500 18000

3902

18529 Q4 FY17

4826

17901 Q3 FY17

17500 17000

4169

Q2 FY17

16500

0

Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

DABUR reported strong sequentially growth rebuffing GST impact and is back on the growth track after a lackluster June quarter. Revenue declined mildly YOY by 1% whereas sequential growth was 9% in September quarter. PAT & EBDITA grew 1% YOY whereas on quarterly basis growth was in double digits. PAT stood at Rs. 3627 Mn against Rs. 2649 Mn in Q1 FY18 rising 37% QOQ. EBDITA quarterly growth was 29% at Rs. 5042 Mn in Q2 FY18 compared to Rs. 4979 Mn same period previous year. Operating cost stood at Rs. 15390 Mn against Rs. 15730 Mn same period previous year declining 2% YOY and increasing 4% QOQ. The company reported strong revenue growth on the back of strong growth witnessed in oral care, skin care and digestives segment. Apart from domestic business, international business has also grown strongly especially in Egypt, Nigeria and Turkey. The company is gaining positive momentum from rural uptick and receding GST impact. With consumer demand for nature and Ayurveda-based products on the rise, Dabur has positioned itself as the ‘Science-based Ayurveda’ specialist which will pave its way for long term future growth.

4979 1000

2000

3000

4000

5000

6000

NET PROFIT GROWTH (Rs. In Mn) 4000 3627

3584 3337

3500 3000

2938 2649

2500 2000 1500 1000 500 0 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

OTHER INCOME (Rs. In Mn)

NET PROFIT MARGIN

843 Q2 FY18

20.00%

18.51% 18.08%

17.43%

18.00% 16.00%

Q1 FY18

813

14.00%

15.85% 14.80%

12.00% Q4 FY17

650

10.00% 8.00%

Q3 FY17

6.00%

831

4.00% Q2 FY17

893

2.00% 0.00%

0

200

400

600

800

1000

Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

Expenditure Analysis

Rs. In Mn

Q2 FY18

Q2 FY17

CHG%

Cost Of Materials

7721.50

8012.20

-4%

Purchases of Stock In Trade

1266.90

1945.20

-35%

Employee Benefit Expense

COST OF MATERIAL (Rs. In Mn) 8200 8000

8068

8012

7722

7800 2037.30

2158.10

-6%

7420

7600 7400

Advertisement

1457.10

1494.10

-2%

7200

7042

7000

6800 Other Expense

2124.50

2402.90

-12%

Depreciation & Amortization

400.80

357.40

12%

6600 6400 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

Material consumed accounted for the biggest chunk, 53% of operating expenditure fell 4% YOY at Rs. 7722 Mn and jumped 4% QOQ in September quarter. Stock in trade constitutes 9% of total operating expenditure and stood at Rs. 1267 Mn against Rs. 1945 Mn corresponding quarter previous year. Employee benefit expense declined 6% YOY at Rs. 2037 Mn and was stagnant quarterly accounting 14% of operating expenditure in the Q2 FY18. Expenditure on advertisement fell 3% QOQ at Rs. 1457 Mn in September quarter and declined 2% YOY. Other Expenses were reported at Rs. 2125 Mn declining 12% YOY against Rs. 2403 Mn corresponding quarter previous year. .

DEPRECIATION (Rs. In Mn)

INTEREST EXPENSE (Rs. In Mn) 180

450 400

395

391

401

357

350

160 140

333

300

120

250

100

200

80

150

60

100

40

50

20

0

TAXATION EXPENSE (Rs. In Mn) 1200

800

600

139

133

133

117

0 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

1000

166

977 880

873 753 589

400 200 0 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

EBDITA margin for the current quarter stood at 25.74% compared to 25.13% same period previous year. On yearly basis, EBDITA margins jumped 61 basis points whereas sequential expansion was 394 basis points. Operating expenditure de-growth was at 2% YOY but on quarterly basis it jumped 4% in September quarter. Higher EBDITA expansion was due to higher revenue and stable other income. Depreciation has been on the rise over the past three quarters rising 3% QOQ and 12% YOY. Depreciation stood at Rs. 401 Mn in Q2 FY18 against Rs. 357 Mn corresponding quarter previous year. Interest expense plunged 20% YOY in the current quarter at Rs. 133 Mn. On absolute basis decline was Rs. 33 Mn but was stagnant sequentially. Interest Expenses constituted 3.67% of the total Net Profit in Q2 FY18. Taxation expenditure accounted 4% of total revenue in Q2 FY18. The YOY rise was just 1% from Rs. 873 Mn to Rs. 880 Mn in the September quarter. Total expenditure including interest cost and taxation constituted 86% of the total revenue in the September quarter same as the corresponding quarter previous year.

Segment Revenue Rs. In Mn Consumer Care Business Food Business

Q2 FY18

Q2 FY17

CHG%

16146.90

16483.70

-2%

2828.20

2697.20

5%

264.90

284.30

-7%

Retail Business Other Segments

309.30

292.00

6%

Other Operating Revenue

40.00

59.00

-32%

DOMESTIC FMCG SALES - CATEGORY WISE

Foods 19%

Hair Care 20%

OTC & Ethicals 9% Digestives 6%

Health Supplement Home 15% Care 8%

Oral Care 19%

Skin Care 5%

SEGMENT REVENUE Retail business 1%

Other Segments 2%

Food Business 14%

Consumer care business 83%

After the disruption in Q1 FY18, business seems to have stabilized as evident to improved margins and strong volume growth. Domestic contribution has increased from 65% in Q2 FY17 to 68% in Q2 FY18. Oral care category posted growth of 22.8% with toothpaste and toothpowder category reporting 26% & 5% growth respectively. Dabur launched red gel in August 2017 and is witnessing good traction. Hair oil & Skin care jumped 2% & 16% respectively in Q2 FY18. Homecare category also reported strong growth of 10% YOY due strong performance of odomos and odonil. Shampoos & post wash category declined 14.9% YOY. On the whole share of hair care category fell from 22% to 20% in September quarter FY18. Health supplements grew 3% YOY driven by Honey growing 9% and digestives posting growth of 12% in Q2 FY18. OTC category jumped 6% whereas ethicals declined 2.5% mainly due to disruption caused by GST and higher contribution of wholesale channel. Food category witnessed strong growth driven by beverages. Market share of Real improved 176 basis points and achieved 55.1% market share. Activ coconut water performed well reporting good performance

during the quarter. International Business contributed 28.5% as compared to 31.6% last year. International Business posted 3.9% growth in constant currency terms during Q2 FY18. Severe devaluation of Egyptian Pound, Naira and Turkish Lira led to significant translation loss of about Rs. 970 Mn impacting about 5% of consolidated sales. Egypt on the other hand reported strong growth of 38% and Hobi grew at 27% in constant currency. Sub Saharan Africa market reported 18% growth driven by localization and distribution expansion initiatives in Nigeria, South Africa and East Africa.GCC markets were under pressure due to shutdown in Algeria because of import quota embargo and added pressure on sales.

Corporate Profile Dabur India Ltd. is one of India’s leading FMCG Companies with a legacy of quality and experience of over 133 years. Dabur is India’s one of the most trusted brands and the world’s largest Ayurvedic and Natural Health Care Company. The 132-year-old ayurvedic company, promoted by the Burman family, started operating in 1884 as an Ayurvedic medicines company. From its humble beginnings in the bylanes of Calcutta, Dabur India Ltd has come a long way to become one of the biggest Indian-owned consumer goods companies with the largest herbal and natural product portfolio in the world. Overall, Dabur has successfully transformed itself from being a family-run business to a professionally managed enterprise. Dabur is also a world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur's FMCG portfolio 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, Réal for fruit juices and beverages and Fem for fairness bleaches and skin care products. Dabur operates in key consumer product categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The ayurvedic company has a wide distribution network, covering 6 million retail outlets with a high penetration in both urban and rural markets. Dabur's products also have huge presence in the overseas markets and are available in over 120 countries across the globe. Its brands are highly popular in the Middle East, SAARC countries, Africa, US, Europe and Russia.

Financial Analysis QUARTERLY PROFIT & LOSS STATEMENT OF DABUR INDIA LTD FROM 31st March 2017 TO 31st Dec 2017E VALUE

31-March-17

30- June-17

30-Sep-17

31-Dec-17E

Rs. In Million

3 months

3 months

3 months

3 months

19146.80

17900.60

19589.30

20372.87

OTHER INCOME

650.40

812.80

843.20

927.52

TOTAL INCOME

19797.20

18713.40

20432.50

21300.39

EXPENDITURE

-14971.20

-14811.70

-15390.30

-16159.82

EBDITA

4826.00

3901.70

5042.20

5140.58

DEPRECIATION

-395.40

-390.60

-400.80

-420.84

PROFIT BEFORE INTEREST & TAX

4430.60

3511.10

4641.40

4719.74

INTEREST

-116.60

-132.80

-133.20

-139.86

EXCEPTIONAL ITEM

0.00

-145.40

0.00

0.00

PROFIT BEFORE TAX

4314.00

3232.90

4508.20

4579.88

TAX

-976.70

-588.80

-879.50

-809.14

PROFIT AFTER TAX

3337.30

2644.10

3628.70

3770.74

EQUITY CAPITAL

1761.50

1761.50

1761.50

1761.50

FACE VALUE

1.00

1.00

1.00

1.00

EPS

1.89

1.50

2.06

2.14

INCOME FROM OPERATIONS

ANNUAL PROFIT & LOSS STATEMENT OF DABUR INDIA LTD FROM 2016 TO 2020E VALUE

31- Mar-16

31- Mar-17

31- Mar-18E

31-Mar-19E

31-Mar 20E

Rs. In Million

12 months

12 months

12 months

12 months

12 months

INCOME FROM OPERATIONS

78687.70

77014.40

79324.83

83291.07

87039.17

OTHER INCOME

2171.90

2983.50

3013.34

3164.00

3322.20

TOTAL INCOME

80859.60

79997.90

82338.17

86455.08

90361.37

EXPENDITURE

-63504.90

-61925.00

-62853.88

-65996.57

-68768.42

EBDITA

17354.70

18072.90

19484.29

20458.51

21592.95

DEPRECIATION

-1331.90

-1428.60

-1571.46

-1681.46

-1765.54

PROFIT BEFORE INTEREST & TAX

16022.80

16644.30

17912.83

18777.04

19827.41

-484.80

-540.30

-551.11

-567.64

-596.02

EXCEPTIONAL ITEM

0.00

0.00

-145.40

0.00

0.00

PROFIT BEFORE TAX

15538.00

16104.00

17216.33

18209.41

19231.39

TAX

-2999.00

-3303.40

-3369.47

-3504.25

-3609.37

PROFIT AFTER TAX

12539.00

12800.60

13846.86

14705.16

15622.02

MINORITY INTEREST

-0.10

-33.70

0.00

0.00

0.00

SHARE OF PROFIT/LOSS OF JV

-27.40

2.50

1.70

1.87

2.06

NET PROFIT

12511.50

12769.40

13848.56

14707.03

15624.08

EQUITY CAPITAL

1759.10

1761.50

1761.50

1761.50

1761.50

RESERVES

39947.00

46712.40

56989.13

63827.82

70210.61

FACE VALUE

1.00

1.00

1.00

1.00

1.00

EPS

7.11

7.27

7.86

8.35

8.87

INTEREST

Ratio Analysis Year

FY 16A

FY 17A

FY18E

FY19E

FY20E

7.11

7.27

7.86

8.35

8.87

NPM

15.90%

16.58%

17.46%

17.66%

17.95%

EBDITA MAGIN

22.06%

23.47%

24.56%

24.56%

24.81%

ROE

30.07%

26.41%

23.57%

22.42%

21.71%

DEBT EQUITY

0.19

0.19

0.18

0.17

0.17

EV/EBDITA

35.90

34.42

31.94

30.41

29.38

BOOK VALUE

23.71

27.52

33.35

37.23

40.86

P/BV

15.13

13.03

10.75

9.63

8.78

PE

50.43

49.47

45.62

42.96

40.44

EPS

BALANCE SHEET OF DABUR INDIA LTD FROM 2016-2020E CAPITAL & LIABILITIES (Rs. In Mn)

2016

2017

2018E

2019E

2020E

1759.10 39947.00

1761.50 46712.40

1761.50 56989.13

1761.50 63827.82

1761.50 70210.61

41706.10

48473.90

58750.63

65589.32

71972.11

Minority Interest NON CURRENT LIABILITIES

217.10

247.70

272.47

305.17

335.68

Borrowings

3424.20

4712.10

5183.31

5442.48

5714.60

Share Capital Reserves NETWORTH

Other Financial Liabilities

49.60

37.10

5.57

6.12

6.73

Provisions

508.80

534.00

598.08

669.85

736.83

Deferred Tax Liabilities TOTAL NON CURRENT LIABILITIES

882.40

1080.40

1210.05

1331.05

1450.85

4865.00

6363.60

6997.00

7449.50

7909.02

Borrowings

4497.40

4403.30

5195.89

5819.40

6517.73

Trade Payables

13301.20

13026.70

12896.43

13541.25

14624.56

Other Financial Liabilities

1203.30

1737.20

1007.58

1057.95

1142.59

Other Current Liabilities

2317.30

1754.40

1912.30

2007.91

2108.31

Provisions

905.40

918.90

1148.63

1229.03

1376.51

Current Tax Liabilities TOTAL CURRENT LIABILITIES

310.20

384.70

430.86

465.33

488.60

22534.80

22225.20

22591.69

24120.88

24881.78

TOTAL EQUITY & LIABILITIES

69323.00

77310.40

88611.79

97464.87

105098.59

12387.70

14790.20

15656.84

17941.03

19867.31

Capital Work In Progress

448.00

421.00

568.35

596.77

626.61

Investment Property

606.00

549.90

604.89

695.62

765.19

Goodwill

4105.30

4105.30

4228.46

4439.88

4661.88

Other Intangible Assets

181.00

138.60

139.99

141.39

142.80

0.00

0.00

1.80

1.22

1.25

18809.10

24994.10

28743.22

31617.54

34146.94

131.70

123.60

185.40

222.48

255.85

CURRENT LIABILTIES

ASSETS (Rs. In Mn) NON CURRENT ASSETS Property, Plant & Equipment

Biological Assets Investments Others

497.60

1023.00

1012.77

1053.28

1084.88

37166.40

46145.70

51141.71

56567.82

61408.65

Inventories

10965.00

11067.10

11288.44

11831.24

12304.93

Investments

7492.30

7407.50

11111.25

12387.46

13254.58

Trade Receivables

8092.00

6504.20

7805.04

8975.80

9873.38

Cash & Cash Equivalents

1311.50

1632.20

1795.42

1939.05

2055.40

Bank balances

886.70

1415.90

1585.81

1728.53

1832.24

Others

290.60

341.10

562.82

647.24

711.96

Current Tax Asset

30.60

0.00

0.00

0.00

0.00

Other Current Assets

3087.90

2796.70

3300.11

3366.11

3635.40

Assets Held For Sale

0.00

0.00

21.20

21.62

22.06

32156.60

31164.70

37470.08

40897.05

43689.94

69323.00

77310.40

88611.79

97464.87

105098.59

Other Non Current Assets TOTAL NON CURRENT ASSETS CURRENT ASSETS

TOTAL CURRENT ASSETS TOTAL ASSETS

Comparative Analysis

Q2 FY 18

EPS (Rs)

REVENUE (Rs. In Mn)

PAT (Rs. In Mn)

EBDITA (Rs. In Mn)

MKT CAP (Rs. In Mn)

DABUR LTD

2.06

19589

3627

5042

631762

MARICO LTD

1.41

15362.90

1850

2805

405431

HUL LTD Standalone

5.90

81990

12760

18860

2975076

GODREJ CONSUMER PRODUCTS LTD

5.31

25066

4680

5508

672132

SUHANI ADILABADKAR [email protected] 9701063320

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