”Top-line above estimates, high tax rate, depreciation and interest expenses curb bottom line”

 

Exhibit 1: Quarterly Summary
(` cr)	4QFY11	4QFY10		Angel Est	% Diff
Revenue	1,108.2	848.6	30.6	1,025.6	8.1
EBITDA	205.6	161.9	27.0	202.5	1.5
OPM (%)	18.6	19.1	(53)	19.8	(120)
Adj. PAT	147.0	135.5	8.5	154.7	(5.0)

Source: Company, Angel Research; Note: Our estimates did not include financials from recent acquisitions

Dabur posted a mixed set of numbers for the quarter. While top-line growth was above our estimates at 30.6% yoy primarily driven by volume growth (~10% domestic volume growth), earnings grew at 8.5% yoy below our estimates due a sharp rise in tax rate, interest and depreciation expenses. At the operating front, Dabur recorded a margin contraction of 53bp yoy due high other expenses (up 445bps yoy). In terms of segmental performance – CCD registered a growth of 36.6% yoy, CHD grew 12.1% yoy and Foods business posted a growth of 9.4% yoy for the quarter. The gross sales also include the income from Hobi and Namaste entities.

Exhibit 2: Quarterly Financial Update
Y/E March (` cr)	4QFY11	4QFY10	% chg	FY2011	FY2010	% chg
Net Sales	1,108.2	848.6	30.6	4,077.4	3,390.5	20.3
Consumption of RM	489.0	384.3	27.2	1,905.3	1,550.8	22.9
(% of Sales)	44.1	45.3		46.7	45.7
Staff Costs	91.5	75.4	21.3	322.2	284.7	13.2
(% of Sales)	8.3	8.9		7.9	8.4
Advertising	127.4	115.6	10.2	534.6	493.5	8.3
(% of Sales)	11.5	13.6		13.1	14.6
Other Expenses	194.7	111.3	74.9	560.7	432.4	29.7
(% of Sales)	17.6	13.1		13.8	12.8
Total Expenditure	902.6	686.7	31.5	3,322.8	2,761.4	20.3
Operating Profit	205.6	161.9	27.0	754.7	629.1	20.0
OPM	18.6	19.1		18.5	18.6
Interest	15.9	5.2	208.3	30.3	20.2	50.1
Depreciation & Amortisation	24.9	14.9	67.7	81.6	56.2	45.2
Other Income	23.7	17.2	38.1	65.2	48.2	35.1
PBT (excl. Extr Items)	188.4	159.0	18.5	707.9	600.9	17.8
Extr Income/(Expense)	(0.01)	(2.24)		-	(1.97)
PBT (incl. Extr Items)	188.4	161.3	16.8	707.9	602.9	17.4
(% of Sales)	17.0	19.0		17.4	17.8
Provision for Taxation	41.4	25.8	60.4	139.0	100.5	38.3
(% of PBT)	22.0	16.0		19.6	16.7
PAT (Before Minority)	147.0	135.5	8.5	568.9	502.4	13.2
Minority Interest	0.0	0.0		0.3	(0.8)
Reported PAT	147.0	135.5	8.5	568.6	503.2	13.0
PATM	13.3	16.0		13.9	14.8
Equity shares (cr)	174.1	86.8		174.1	86.8
FDEPS (`)	0.8	0.8	8.5	3.3	2.9

 Source: Company, Angel Research

Volume growth steady in double-digits: Dabur posted a good growth in top-line by 30.6% yoy to `1,108.2cr (`848.6cr) on a consolidated basis led primarily by volumes. Within CCD, hair oils category reported a 15% growth, home care category grew at 32.5%, skin care grew at 16.8% due to demand in Gulabari products and expansion of Fem.

Earnings growth in-line with estimates: Dabur’s reported Earnings for the quarter on a consolidated basis registered a growth of 8.5% yoy to `147cr (`135.5cr), below our estimates, due to 597bp rise in tax rate, higher interest rate (up 208% yoy) and high depreciation expense (up 68% yoy).

Gross margins expand, OPM contract due to high other expensends: At the operating front, Dabur delivered a margin contraction of 53bp yoy to 18.6% (19.1%) resulting into a growth of 27% yoy in EBITDA to `205.6cr (`161.9cr). While gross margins expanded 281bp on account of top line growth, lower ad spends (down 213bp) coupled with lower staff costs (down 63bp yoy) curtailed further operating margin contraction which was primarily due to high other expenses (445bp yoy).

Outlook and Valuation: During FY2011-13E, we expect Dabur to post a CAGR of 22% in top-line aided by steady volume growth in its core CCD categories of hair care, skin care and foods coupled with robust growth in its international business. We expect Dabur’s OPMs to sustain at ~18.5-18.7% levels owing to cost rationalization and better product mix (premium product launches like NUtrigo). We have modeled in a healthy 21% CAGR in earnings aided by robust top-line growth and consistent margins, negated by higher interest, depreciation and tax expenses.  We recommend our Neutral view on the stock.

We would release a detailed note on the stock post the concall which is scheduled on April 28, 2011 at 1600hrs, Dial in number is 30650117.

Key Financials (Consolidated)
Y/E March (`cr)	FY2010	FY2011	FY2012E	FY2013E
Net Sales	3,390	4,077	5,274	6,043
% chg	20.9	20.3	29.4	14.6
Net Profit (Adj)	500.5	568.9	723.0	837.2
% chg	28.1	13.7	27.1	15.8
OPM (%)	18.6	18.5	18.6	18.7
EPS (`)	2.9	3.3	4.2	4.8
P/E (x)	35.8	31.6	24.9	21.5
P/BV (x)	9.6	14.5	11.2	8.9
RoE (%)	57.1	52.4	51.0	46.2
RoCE (%)	52.3	54.1	59.0	55.3
EV/Sales (x)	5.3	4.3	3.3	2.8
EV/EBITDA (x)	28.5	23.4	17.7	15.0