DABUR INDIA LTD
INITIATE BUY
TARGET PRICE 163
Analyst : Naveen Vyas
Email_id : nvyas@microsec.in
-126 APRIL 2013
Microsec Research
DABUR India Ltd
BUY
Sector – FMCG
Market Data
Current Market Price (INR)
Target Price
% Upside
52 Week High / Low (INR)
Market Capitalization (In INR cr)
146
163
12%
148 / 101
25,455
S har e holding
Others
6.85%
DII
4.25%
We Initiate Dabur India Ltd a BUY. The 128-year-old company, promoted by the
Burman family, had started operations in 1884 and is today one of India’s leading
FMCG Companies with Revenues of more than US$1 Billion. Dabur is today India’s
most trusted name and the world’s largest Ayurvedic and Natural Health Care
Company. Dabur is a household brand having large distribution network and strong
rural presence. Dabur has successfully transformed itself from being a family-run
business to become a professionally managed enterprise. Dabur's products also have a
huge presence in the overseas markets and are today available in over 60 countries
across the globe.
Investment Highlights
‘Volume is expected to grow in a range of 9-10% for FY14E in a challenging business
environment : Dabur is expected to maintain a volume growth of 9-10% for FY14E
which we think is positive for the company in a challenging business enironment,
witnessing slowdown in economy and cap in subsidies across sectors. The company’s
mass product appeal, limited discretionary products portfolio and rural expansion will
help it to maintain the volume growth.
FIIS
20.24%
Promoters
68.66%
STOCK SCAN
BSE Code
NSE Code
Bloomberg Ticker
Reuters Ticker
Face Value (INR)
Equity Share Capital (Rs. cr.)
Average 3 Year P/E
Beta vs Sensex
Average Daily Volmes (6 M)
Dividiend Yield
Return (%) 1YR
500096
DABUR
DABUR.IN
DABUR.BO
1.00
174.29
33.1x
0.4x
1,222,000
0.89
32
140.00
Strong Portfolio of Powerful Brands and wide distrubution network : Dabur has
strong portfolio of powerful brands like ‘Dabur, Vatika, Hajmola, Real and FEM ’. It
spends around 13-14% of its sales on the advertisement every year to increase its brand
presence. The company has build a wide distribution network covering 5.8 million
retailers across the country to support its growth.
Namaste Business to seek strong revival in FY14: Namaste which contributes around
10% of the total sales of the company is expected to perform better in FY14 on back of
current restructuring initiatives taken by the company. The company is undertaking
brand re-launches for key products like ORS, working on distribution restructuring
and creating an efficient supply chain for Namaste in the African market.It is also
setting up a manufacturing base in West Asia, Nigeria and South Africa.
Well Diversified Business Model: Dabur India business operation is well diversified.
Around 30% of its sales comes from international business and 70% from domestic
business. The products range of the company are also well diversified covering key
consumer product categories like Hair Care, Oral Care, Health Care, Skin Care, Home
Care and Foods.
Exhibit 1.Dabur India – Historical Financials and Projections – INR crores
120.00
100.00
Dabur
SENSEX
3 /2 7 /2 0 1 3
2 /2 7 /2 0 1 3
1 /2 7 /2 0 1 3
1 2 /2 7 /2 0 1 2
1 1 /2 7 /2 0 1 2
1 0 /2 7 /2 0 1 2
9 /2 7 /2 0 1 2
8 /2 7 /2 0 1 2
7 /2 7 /2 0 1 2
6 /2 7 /2 0 1 2
5 /2 7 /2 0 1 2
4 /2 7 /2 0 1 2
80.00
Particulars
Net Sales
Growth (%)
EBITDA
EBITDA Margins (%)
Adjusted Net Profit
Net Profit Margins (%)
Net Profit Growth (%)
EPS (Adjusted)
P/E
P/BV
RoE
FY10A
3,416.0
648.0
19.0%
503.0
14.7%
2.90
50.36
27.50
58.8%
FY11A
4,105.0
20%
801.0
19.5%
569.0
13.9%
13%
3.27
44.66
19.90
51.8%
FY12A
5,305.0
29%
890.0
16.8%
645.0
12.2%
13%
3.70
39.47
15.70
44.7%
FY13E
6,205.0
17%
1,024.0
16.5%
767.0
12.4%
19%
4.40
33.19
12.07
41.0%
FY14E
7,318.0
18%
1,237.0
16.9%
948.0
13.0%
24%
5.44
26.85
9.36
39.3%
Source: Company, Microsec Research
-226 APRIL 2013
Microsec Research
Company Profile
Dabur India Ltd is one of India’s leading FMCG Companies with Revenues of more
than US$1 Billion. The 128-year-old company, promoted by the Burman family, had
started operations in 1884 and is today India’s most trusted name and the world’s
largest Ayurvedic and Natural Health Care Company.
Dabur India is also a world leader in Ayurveda with a portfolio of over 250
Herbal/Ayurvedic products. Dabur's FMCG portfolio today 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 today operates in key consumer products categories like Hair Care, Oral Care,
Health Care, Skin Care, Home Care and Foods. The company has a wide distribution
network, covering over 5.8 million retail outlets with a high penetration in both urban
and rural markets.
Dabur's products also have a huge presence in the overseas markets and are today
available in over 60 countries across the globe. Its brands are highly popular in the
Middle East, SAARC countries, Africa, US, Europe and Russia. Dabur's overseas
revenue today accounts for over 30% of the total turnover.
From its humble beginnings in the bylanes of Calcutta, Dabur India Ltd has come a
long way today 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 become a
professionally managed enterprise.
Key Milestones
1884
1972
• The company
shifted its base
to Delhi from
Kolkata.
• Dr. SK Burman
started an
Ayurvedic
Pharmacy in
Kolkata.
1998
2003
• Professionalized
with Burman
Family handling
over day to
management
2006
• Pharma Business
de-merged to
focus on core
FMCG Business.
2008
• Acquired Fem
Care Pharma
entering
mainstream
skin care.
• Dabur figured
in Top 10 Great
places to work.
1986
• Registered as a
Public Limited
Company.
2004
• International
Business set up
in Dubai to tap
overseas
opportunity.
2010
• Overseas
acquisitions –
Hobi Group,
Turkey and
Namaste
Laboratories,
US.
1994
• Listed on the
Bombay Stock
Exchange.
2005
• Acquired
Balsara
strengthening
oral Care &
gaining entry
into Home
Care.
2012
• Crossed INR50
Billion mark in
annual
revenues and
Market Cap of
US$4 Billion
-326 APRIL 2013
Microsec Research
Business Overview of Dabur India
Dabur India Ltd business is divided into two broad categories i.e. Domestic Business
and International Business. Domestic Business contributes around 70% of its sales and
the rest is international.
Domestic Business includes Consumer Care, Foods, Retail and Others whereas
International Business includes Dabur international, Namaste Lab and Hobi Group
sales.
Consumer Care Business
The Consumer Care Business is the largest segment, contributing to 56% of
consolidated sales and grew by 11.4% during fiscal 2011-12. The segment is divided
into the key verticals of Health care and Home and Personal care.
Contribution to Consumer Care Business
Skin care
6%
Home care
6%
Hair care
30%
Digestives
8%
OTC
12%
Oral care
17%
Health care
21%
Source : Company database
-426 APRIL 2013
Microsec Research
-526 APRIL 2013
Microsec Research
Foods Business
The Foods business at present includes packaged fruit juices and nectars under the
brands Real and Real Activ and culinary pastes under the brand Hommade
International Business
Dabur's International Business continued on a strong growth trajectory with sales
growing by 78.3% to INR1616 crores. The International Business now contributes
30.3% to consolidated sales. The growth in International business has been supported
by two overseas acquisitions - Hobi Group and Namaste Laboratories, LLC which
came under the Dabur fold.
International Sales Regional Break up
Others
6%
Middle East
30%
Asia
16%
Af rica
22%
US
26%
Source : Company database
-626 APRIL 2013
Microsec Research
FMCG Industry Overview
The Indian FMCG sector is the fourth largest sector in the economy with a total market
size of INR189500 crore. The market is estimated to grow to US$ 100 billion by 2025,
according to market research firm Nielsen. In the last decade the FMCG sector has
grown at an average of 11% a year and in the last five years, annual growth accelerated
to 17%. FMCG sector in India continues to grow well in both urban and rural areas.
Rural India contributes to around one third of FMCG sales in India
Emerging FMCG Trends In India
-726 APRIL 2013
Microsec Research
Penetration Level Of Various Products In India
Industry Outlook
With a big demand push from rural India, the fast moving consumer goods (FMCG)
industry is expected to witness a robust growth of 18 per cent over the next 4-5 years
and emerge as the sector which will claim the biggest component of the consumer
expenditure by the end of the 12th Plan, an ASSOCHAM Eco Pulse study has
indicated.
It said within the FMCG industry, the product categories which are expected to see
attractive growth are the packaged foods category, toiletries, beverages, detergents,
edible oil, and cosmetics.
In the food category, thanks to improving purchasing power, consumption pattern is
shifting towards high value and protein products such as vegetables, fruits, milk, meat,
fish and eggs. Rural India is evolving as the engine of growth for FMCG sector
Risks and Challenges
 Diverse consumer preferences
 Increasing competition
 Rising logistics, procurement costs
 Ability to win rural consumers
 Slowdown in rural demand
 High Inflation
 Removal of import restrictions resulting in replacement of domestic brands
 Increasing clutter – advent of price wars
-826 APRIL 2013
Microsec Research
Investment Thesis
9.5%
12.0%
Jun-12
11.0%
12.0%
Mar-12
11.0%
9.0%
Jun-11
10.0%
9.0%
Mar-11
12.0%
Volum e Grow th (%) of Last 12 Quarters
10.0%
16.0%
12.0%
20.0%
14.0%
17.0%
‘Volume is expected to grow in a range of 9-10% for FY14E in a challenging business
environment : Dabur is expected to maintain a volume growth of 9-10% for FY14E
which we think is positive for the company in a challenging business enironment,
witnessing slowdown in economy and cap in subsidies across sectors. The company’s
mass product appeal, limited discretionary products portfolio and rural expansion will
help it to maintain the volume growth.The Volume growth of Dabur India ltd, on an
average, has been in double digits from the last 12 quarters
8.0%
4.0%
Dec-12
Sep-12
Dec-11
Sep-11
Dec-10
Sep-10
Jun-10
Mar-10
0.0%
Strong Portfolio of Powerful Brands and wide distrubution network : Dabur has
strong portfolio of powerful brands like ‘Dabur, Vatika, Hajmola, Real and FEM ’. It
spends around 13-14% of its sales on the advertisement every year to increase its brand
presence. The company has build a wide distribution network covering 5.8 million
retailers across the country to support its growth.
Dabur's FMCG portfolio today 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.
Distribution Network with total reach of 5.8 mn Retail Outlets
-926 APRIL 2013
Microsec Research
Namaste Business to seek strong revival in FY14E: Namaste which contributes
around 10% of the total sales of the company is expected to perform better in FY14 on
back of current restructuring initiatives taken by the company. The company is
undertaking brand re-launches for key products like ORS, working on distribution
restructuring and creating an efficient supply chain for Namaste in the African
market.It is also setting up a manufacturing base in West Asia, Nigeria and South
Africa
The slow growth of Namaste business in US was due to change in the brand name
from Organic Root Stimulator to ORS because of some regulatory issue as a result of
which the company has to do alteration of the entire brand architecture and incur
brand cost for the same in FY13. Now the process has been complete and the business
is expected to revive strongly in FY14E.
Overview of Namste Business:
Dabur India Limited through its subsidiary Dabur International Limited acquired 100%
stake in Namaste Laboratories LLC for $100 million (about INR450 crore), in an all-cash
deal on November 2010. Namasté is a leading ethnic hair care products company,
having products for women of colour, with revenues of $95 million (CY2010) from US,
Europe, Middle East and African markets.
Well Diversified Business Model: Dabur India business operation is well diversified.
Around 30% of its sales comes from international business and 70% from domestic
business. The products range of the company are also well diversified covering key
consumer product categories like Hair Care, Oral Care, Health Care, Skin Care, Home
Care and Foods.
This structural shift in consumption pattern, termed popularly as ‘the consumption
Source : Company database
- 10 26 APRIL 2013
Microsec Research
Financials Snapshot
Net Sales [INR‐Crore]
6,000
5,305
5,000
4,105
4,000
3,000
3,416
2,831
2,385
2,000
1,000
‐
FY08
FY09
FY10
FY11
FY12
EBIDTA [INR‐Crore]
1000
890
40.0%
801
800
35.0%
648
600
492
428
19.0%
30.0%
25.0%
19.5%
16.8%
400
17.9%
45.0%
20.0%
15.0%
17.4%
10.0%
200
5.0%
0.0%
0
FY08
FY09
FY10
FY11
FY12
Normalised PAT [INR‐Crore]
800
720
645
640
569
560
503
480
400
391
333
320
240
160
80
0
FY08
FY09
FY10
FY11
FY12
- 11 26 APRIL 2013
Microsec Research
9M Financials
INR cr
Peer comparison
Source: Bloomberg Consensus, company database; Financials in INR crores
Note: Nestle India and Glaxosmithkline Consumer financial year end in December.
- 12 26 APRIL 2013
Microsec Research
Valuation
At the CMP of INR146, the stock discounts its FY13E EPS of INR4.4 by 33x and its
FY14E EPS of INR5.4 by 27x. Its 3 year and 5 year Average P/E works out to be 33x
and 31x respectively as per Bloomberg. With Strong Brand Value, larger rural
penetration, revival expected in international business and stable business outlook,
makes Dabur India a good bet for investment. We assign a multiple of 30x on its
FY14EPS of INR5.44 to arrive at a Target price of INR163 (i.e. 12% upside from CMP)
for a time horizon of 12 months.
Key concern
Highly Competitive Industry: FMCG Industry is highly competitive industry with more
players coming in the fields of personal care, oral care and skin care. Consumers are very
price sensitive in this industry.
Major Slowdown in the economy - Any major slowdown in the economy will have a
negative impact on the volume growth of the company and may affect its topline .
- 13 26 APRIL 2013
Microsec Research
Recent Launches - India
Recent Launches - International
- 14 26 APRIL 2013
Microsec Research
Income Statement
(INR crore)
Ratio Analysis
- 15 26 APRIL 2013
Microsec Research
Balance-Sheet
(INR crore)
Cash Flow
- 16 26 APRIL 2013
Microsec Research
Microsec Research: Phone No.: 91 33 30512100 Email: microsec_research@microsec.in Ajay Jaiswal: President, Investment Strategies, Head of Research: ajaiswal@microsec.in Fundamental Research Name Sectors Designation Email ID Nitin Prakash Daga IT, Telecom & Entertainment AVP‐Research npdaga@microsec.in Naveen Vyas Midcaps, Market Strategies AVP‐Research nvyas@microsec.in Sutapa Roy Economy Research Analyst s‐roy@microsec.in Sanjeev Jain BFSI Research Analyst sjain@microsec.in Anik Das Mid Cap Research Analyst adas4@microsec.in Neha Majithia Mid Cap Research Analyst nmajithia@microsec.in Soumyadip Raha Mid Cap Executive Research sraha@microsec.in Saroj Singh Mid Cap Executive Research ssingh2@microsec.in Kapil Bhati Mid Cap Executive Research kbhati@microsec.in Technical & Derivative Research Vinit Pagaria Derivatives & Technical VP vpagaria@microsec.in Ranajit Saha Technical Research Sr. Manager rksaha@microsec.in Institutional Desk Dhruva Mittal Institutional Equities Sr. Manager dmittal@microsec.in Puja Shah Institutional Desk Dealer pdshah@microsec.in PMS Division Siddharth Sedani PMS Research AVP ssedani@microsec.in Ketan Mehta PMS Sales AVP ksmehta@microsec.in Research: Financial Planning Division Shrivardhan Kedia FPD Products Manager Research skedia@microsec.in Research‐Support Subhabrata Boral Research Support Asst. Manager Technology Recommendation
Expected absolute returns (%) over 12 months
Strong Buy
>20%
Buy
between 10% and 20%
Hold
between 0% and 10%
Underperform
between 0% and ‐10%
Sell
< ‐10%
sboral@microsec.in MICROSEC RESEARCH IS ALSO ACCESSIBLE ON BLOOMBERG AT <MCLI>
- 17 26 APRIL 2013
Microsec Research
- 18 26 APRIL 2013
Microsec Research