3QFY2013 Result Update | FMCG

January 30, 2013

Dabur India
Performance Highlights
Quarterly Data (Consolidated)
(` cr) Revenue EBITDA OPM (%) PAT
Source: Company, Angel Research

NEUTRAL
CMP Target Price
Investment Period
3QFY12 1,453 221 15.2 173 % yoy 12.3 21.6 126bp 22.2 2QFY13 1,523 264 17.4 202 % qoq 7.1 1.8 (86)bp 4.3

`130 -

3QFY13 1,631 269 16.5 211

Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 22,623 193.0 0.2 140/92 121,985 1 20,005 6,056 DABU.BO DABUR@IN

For 3QFY2013, Dabur India (Dabur) posted a 12.3% yoy growth in its consolidated top-line, which was in-line with our estimates. The companys net profit rose by 22.2% yoy to `211cr aided by strong operational performance. Key highlights: The domestic consumer business posted a 14.3% yoy growth

with volume growth coming in at 9.5%. While the Management maintained that rural markets and modern trade performed well, lower procurement by CSD impacted sales. In terms of category, Foods grew by 22.1% yoy while Home
& Personal care grew by 15.7% yoy. The Hair care portfolio grew by 13.9%, while Shampoos grew by 29.6% yoy. The companys international business posted a

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 68.7 5.1 19.9 6.3

growth of 9%, with the organic international business posting a growth of 22.4% yoy. The OPM stood at 16.5%, up 126bp yoy, led by a healthy expansion in gross margins in the international business due to reduction in commodity costs. The companys advertising and promotion expenditure as a
percentage of sales rose by 77bp yoy to 14.4%. Finance costs fell by 57.5% yoy to `7.8cr, due to favorable forex impact on a yoy basis. Outlook and valuation: We expect Daburs top-line to post an ~16.1% CAGR over FY201214E. The bottom-line is expected to post a 21.6% CAGR, aided by top-line growth and margin expansion. At the current market price, the stock is trading at 23.7x FY2014E EPS. We recommend Neutral on the stock. Key Financials (Consolidated)
Y/E March (` cr) Net sales % chg Net profit (Adj.) % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

Abs. (%) Sensex Dabur

3m 8.5 3.9

1yr 18.6 39.8

3yr 22.3 62.4

FY2011 4,110 21.2 573.1 14.5 18.7 3.3 39.5 16.2 49.3 38.2 5.7 30.4

FY2012 5,284 28.5 644.1 12.4 16.4 3.7 35.1 13.2 41.4 28.7 4.3 26.3

FY2013E 6,196 17.3 784.1 21.7 16.3 4.5 28.8 11.9 43.4 31.1 3.7 22.8

FY2014E 7,183 15.9 953.5 21.6 16.8 5.5 23.7 9.3 44.0 35.0 3.2 18.8

V Srinivasan
022-39357800 Ext: 6831 [email protected]

Please refer to important disclosures at the end of this report

Dabur India | 3QFY2013 Result Update

Exhibit 1: Quarterly Performance (Consolidated)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Advertising (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation & Amortisation Other Income PBT (excl. Extr Items) Extr Income/(Expense) PBT (incl. Extr Items) (% of Sales) Provision for Taxation (% of PBT) PAT (Before Minority) Minority Interest Reported PAT PATM Equity shares (cr) FDEPS (`)
Source: Company, Angel Research

3QFY13 1,631 795 48.8 123 7.5 235 14.4 208 12.8 1,361 269 16.5 8 31 27 258 258 15.8 48 18.5 210 (0.6) 211 12.9 174 1.2

3QFY12 1,453 740 51.0 106 7.3 198 13.6 187 12.9 1,231 221 15.2 18 21 23 206 206 14.1 34 16.4 172 (1.0) 173 11.9 174 1.0

% yoy 12.3 7.4 16.5 18.6 11.3 10.6 21.6 (57.5) 46.7 18.0 25.7 25.7 41.7 22.5 22.2

2QFY13 1,523 752 49.4 121 8.0 181 11.9 204 13.4 1,258 264 17.4 15 27 28 250 250 16.4 46 18.6 204 1.3 202 13.3 174

% qoq 7.1 5.7 1.5 30.0 2.1 8.2 1.8 (47.7) 13.0 (1.0) 3.3 3.3 2.9 3.4 4.3

9M2013 4,615 2,279 49.4 350 7.6 645 14.0 605 13.1 3,880 735 15.9 44 84 89 696 696 15.1 132 19.0 564 0.9 563 12.2 174

9MFY2012 3,920 2,008 32.3 292 7.4 477 12.2 499 12.7 3,275 644 16.4 48 74 60 582 582 33.7 109 8.2 474 (0.8) 474 31.0 174 2.7

% chg 17.7 13.5 20.1 35.1 21.4 18.5 14.1 (51) (8.7) 14.0 47.9 19.5 19.1 21.4 19.1 18.7

22.2

1.2

4.3

3.2

18.7

Exhibit 2: 3QFY2013 Actual vs Angel estimates

(` cr) Net Sales Operating Profit OPM (%) Net Profit
Source: Company, Angel Research

Actual 1,631 269 16.5 211

Estimates 1,654 274 16.6 219

Variation (%) (1.4) (1.9) (9)bp (3.8)

January 30, 201

Dabur India | 3QFY2013 Result Update

Top-line up 12.3% yoy

Dabur posted a strong top-line growth of 12.3% yoy to `1,631cr. Volume growth

in the domestic Consumer business stood at 9.5%. While the Management maintained that rural markets and modern trade performed well, lower procurement by CSD impacted the sales. In terms of category, Foods grew by
20.6% yoy while Home & Personal care grew by 15.7% yoy. The Hair care portfolio grew by 13.9%, while Shampoos grew by 29.6% yoy. The companys

international business posted a moderate 9.5% yoy growth impacted by compression in Namastes (a subsidiary of Dabur) operations in USA due to restructuring of brand. However, the organic international business posted a healthy growth of 22.4% yoy, with constant currency growth coming in at 16%. Exhibit 3: Top-line grows 12.3% yoy
1,800 1,600 1,400 1,200 (` cr) 1,000 800 600 1,080 1,108 1,205 1,262 1,453 1,364 1,462 1,523 1,631 400 200 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 40.0 35.0 30.0 (yoy %) 25.0 20.0 15.0 10.0 5.0 -

Exhibit 4: Volume growth at 9.5%

14.0 12.0 10.0 (%) 8.0 6.0 4.0 2.0 0.0 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 10.0 8.6 12.7 10.0 10.8 12.4 11.0 9.0 9.5

Top-line (LHS)

yoygrowth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Gross margin expands 219bp yoy, OPM up by 126bp yoy

The companys OPM for the quarter stood at 16.5% up 126bp yoy led by a healthy expansion in gross margins in the international business due to reduction in commodity costs. Gross margin for the company rose by 219bp on a yoy basis. The companys advertising and promotion expenditure as a percentage of sales rose by 77bp yoy to 14.4%. The Consumer care business posted a 20.3% yoy growth in profit to `324cr. However, the profits of the Foods business declined by 16.7% yoy to `18cr due to increase in input costs.

Net profit grows by 22.2% yoy

Daburs reported net profit for the quarter grew 22.2% yoy to `211cr aided by a reasonably strong operational performance. Finance costs fell by 57.5% yoy to `7.8cr, due to favourable forex impact on a yoy basis. Tax rate rose by 210bp yoy to 18.5%.

January 30, 201

Dabur India | 3QFY2013 Result Update

Exhibit 5: OPM up by 126bp yoy

60.0 50.0 40.0 51.6 53.0 47.8 50.0 49.0 49.8 50.0 50.6 51.2

Exhibit 6: Healthy 22.2% yoy growth in Net Profit

260 210 160 110 154 147 128 174 173 171 149 60 10 25.0 20.0 15.0 10.0 5.0 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13

(` cr)

(%)

30.0 20.0 10.0 -

19.4

19.1

14.2 12.6 1Q12

18.7

15.2 13.6 3Q12

15.8

14.1 15.7 1Q13

17.4

16.5

202

12.5 3Q11

11.5 4Q11

10.1 2Q12

13.4 4Q12

11.9 2Q13

14.4 3Q13

OPM

Gross margin

A&P Spends/Sales

PAT (LHS)

yoy growth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 7: Segment-wise performance (Consolidated)

Y/E Mar (` cr) Total Net Sales Consumer Care Foods Business Retail Others Total PBIT Consumer Care Foods Business Retail Others PBIT Margin (%) Consumer Care Foods Business Retail Others 3QFY13 3QFY12 % chg 2QFY13 1,631 1,414 164.9 16.8 35.4 339 323.6 18.1 (2.7) 0.1 20.8 22.9 11.0 (16.4) 0.4 1,453 1267 136.8 12.25 36.9 291 268.9 12.3 11.6 20.6 36.7 (4.0) 16.6 20.3 1,523 1,264 175.8 14.1 69.0 328 289.7 33.4 (3.0) 8.4 21.6 22.9 19.0 (21.3) 12.2 % chg 9MFY13 9MFY12 % chg 7.1 11.9 (6.2) 18.7 (48.7) 3.2 11.7 (45.7) (8.7) (98.5) 4,615 3,852 552 44 167 927 853 67 (5) 13 20.1 22.1 12.1 (12.2) 7.7 3,920 3,350 441 30 507 451 58 (5) 12.9 13.5 13.2 (17.8) 3.2 17.7 15.0 25.3

211

46.5
83.0 89.3 15.0 0.0

99 140.3

21.8 (16.7) (3.3) (17.7) 3.6 (96.4) 20.0 21.2 15.9 (27.2) 9.8

3 300.6

Source: Company, Angel Research

January 30, 201

(yoy %)

Dabur India | 3QFY2013 Result Update

Investment rationale
Niche positioning and acquisitions to drive growth: Daburs niche ayurvedic/herbal based positioning offers it an attractive and unique proposition in terms of product portfolio. We believe the recent acquisitions will contribute steadily to the companys top-line growth. Acquisition rationale: The acquisition of Hobi and Namaste groups provides Dabur entry into an attractive new market. The Management has stated that the integration of Hobi Group and Namaste Group is completed and their portfolio has been extended across geographies.

Outlook and valuation

We expect Daburs top-line to post an ~16.1% CAGR over FY201214E. The bottom-line is expected to post a 21.6% CAGR over the same period, aided by top-line growth and margin expansion. At the current market price, the stock is trading at 23.7x FY2014E EPS. We recommend Neutral on the stock.

Exhibit 8: Peer valuation

Company
Asian Paints Britannia Colgate Dabur GCPL GSKCHL* HUL ITC Marico Nestle* Tata Global

Reco
Neutral Buy Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral

Mcap (` cr)
42,813 5,688 18,828 22,590 24,532 15,579 103,266 237,367 13,878 45,046 8,905

CMP (`)
4,463 476 1,385 130 721 3,704 478 304 226 4,672 144

TP (R`)
584 -

Upside (%)
23 -

P/E (x) FY13E FY14E

36.5 26.0 38.1 28.8 35.5 36.6 31.6 32.4 35.1 41.4 21.8 30.3 19.3 32.6 23.7 28.3 31.3 28.2 27.4 27.8 32.8 18.4

EV/Sales (x) FY13E FY14E

3.7 0.9 5.8 3.7 4.2 4.6 3.9 7.9 2.9 5.2 1.1 3.1 0.7 5.1 3.2 3.5 3.9 3.3 6.7 2.4 4.3 1.0

RoE (%) FY13E FY14E

37.7 39.1 101.0 43.4 25.5 36.3 85.7 35.1 25.4 71.2 8.6 35.7 42.7 93.5 44.0 25.4 31.9 74.3 35.1 22.6 60.3 9.5

CAGR # Sales EPS

17.6 15.3 15.2 16.6 24.7 16.1 15.5 17.4 18.6 16.0 9.7 19.4 25.6 13.8 21.6 25.8 18.3 19.3 18.7 28.1 16.1 19.1

Source: Company, Angel research; Note: # Denotes CAGR over FY2012-14E, *December Year Ending.

Exhibit 9: One year forward PE

50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 May-09 May-10 May-11 May-12 Jan-09 Mar-09 Jan-10 Mar-10 Jan-11 Mar-11 Jan-12 Mar-12 Sep-09 Sep-10 Sep-11 Sep-12 Nov-09 Nov-10 Nov-11 Nov-12 Jan-13 Jul-09 Jul-10 Jul-11 Jul-12

January 30, 201

(x)

Source: Company, Angel Research Note: Blue line indicates 5 year average PE

Dabur India | 3QFY2013 Result Update

Company Background
Dabur is a leading Indian FMCG company, offering products in the hair oil, shampoo, oral care, home care, skin care, foods and healthcare categories. The company has many iconic brands such as Dabur, Vatika, Hajmola, Real and Fem. The company has 17 manufacturing facilities, with a presence in over 60 countries. The company is currently headed by Mr Sunil Duggal.

Profit and loss statement (Consolidated)

Y/E March (` cr) Total operating income % chg Total Expenditure Cost of Materials Advertising Exp Personnel Others EBITDA % chg (% of Net Sales) Depreciation& Amortization EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of associates Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY09 2,805 18.8 2,335 1,376 343 235 381 470 14.9 16.8 49 421 14.7 15.0 23 47 10.5 445 15.7 445 54 12.1 391 (0.4) 391 391 17.2 13.9 4.5 2.2 17.2 FY10 3,390 20.9 2,761 1,551 493 285 432 629 33.7 18.6 56 573 36.0 16.9 20 48 8.8 601 35.1 2 599 100 16.7 498 (0.8) 499 501 28.1 14.8 5.8 2.9 28.1 FY11 4,077 20.3 3,341 1,938 535 309 561 736 17.0 18.1 82 654 14.2 16.0 30 55 10.5 679 13.0 679 139 20.5 540 0.3 540 540 7.7 13.2 3.3 3.3 14.3 FY12 5,325 30.6 4,415 2,685 660 387 683 910 23.6 17.1 103 807 23.3 15.1 54 79 8.0 832 22.6 832 146 17.6 686 (0.8) 687 687 27.2 12.9 3.7 3.7 12.6 FY13E 6,196 16.4 5,186 2,999 867 489 831 1,010 11.0 16.3 104 906 12.2 14.6 51 114 8.1 968 16.3 968 184 19.0 784 (0.8) 785 785 14.3 12.7 4.5 4.5 21.7 FY14E 7,183 15.9 5,979 3,441 1,006 567 965 1,204 19.2 16.8 112 1,092 20.6 15.2 41 126 9.5 1,177 21.6 1,177 224 19.0 953 (0.8) 954 954 21.6 13.3 5.5 5.5 21.6

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers

January 30, 201

Dabur India | 3QFY2013 Result Update

Balance Sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Other Long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Long term loans and adv. Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 799 299 500 59 347 951 148 249 553 805 146 9 1,060 986 339 647 30 264 1,106 192 367 546 920 186 3 1,129 1,934 435 1,499 32 420 1,871 280 467 1,064 1,458 413 101 2,465 2,145 503 1,641 27 483 433 2,400 448 154 1,286 1,751 648 72 2,871 2,478 607 1,871 62 583 300 2,396 324 167 1,342 2,034 362 72 2,948 2,660 719 1,941 67 683 300 2,824 475 67 1,556 2,292 532 72 3,293 87 732 819 5 230 7 1,060 87 848 935 4 179 11 1,129 174 1,217 1,391 4 1,051 19 2,465 174 1,543 1,717 3 1,123 27 2,871 174 1,720 1,894 3 1,023 27 2,948 174 2,265 2,439 3 823 27 3,293 FY09 FY10 FY11 FY12 FY13E FY14E

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers

January 30, 201

Dabur India | 3QFY2013 Result Update

Cash flow statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Interest / Dividend (Net) Direct taxes paid Others Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Interest / Dividend (Net) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY09 445 49 (95) 23 54 (29) 340 (129) (122) (251) 5 131 130 23 (17) 72 77 148 FY10 601 56 (48) 12 100 (11) 510 (134) (104) (238) (14) (51) 151 12 (228) 44 148 192 FY11 712 82 (135) 10 139 35 565 (950) (156) (1,106) 872 233 10 629 88 192 280 FY12 790 103 (66) 5 146 (33) 653 (205) (63) (268) 12.33 72 297 5 (218) 168 280 448 FY13E 968 104 32 12 184 (68) 864 (369) (100) (469) (100) 408 12 (519) (124) 448 324 FY14E 1,177 112 (63) 1 224 43 1,047 (186) (100) (286) (200) 408 1 (609) 151 324 475

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers

January 30, 201

Dabur India | 3QFY2013 Result Update

Key ratios (Consolidated)

Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) RoCE Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover Inventory / Sales (days) Receivables (days) Payables (days) Net Working capital (days) 3.5 49 23 60 (0) 3.4 46 13 50 (1) 2.1 63 32 66 12 2.5 57 32 64 14 2.5 49 30 59 2 2.7 49 30 58 3 47.2 47.4 54.4 52.3 51.6 57.1 38.2 35.4 49.3 28.7 27.1 41.4 31.1 29.1 43.4 35.0 32.5 44.0 4.5 2.2 5.1 1.7 9.5 5.8 2.9 6.4 2.0 10.8 3.3 3.3 3.8 1.2 8.0 3.7 3.7 4.3 1.5 9.9 4.5 4.5 5.1 2.0 10.9 5.5 5.5 6.1 2.0 14.0 57.8 25.5 13.7 1.3 8.1 48.2 21.4 45.1 20.3 12.1 1.5 6.7 35.9 20.0 39.5 34.5 16.2 0.9 5.7 30.4 9.5 35.1 30.3 13.2 1.2 4.3 26.3 8.0 28.8 25.5 11.9 1.5 3.7 22.8 7.8 23.7 21.2 9.3 1.5 3.2 18.8 6.9 FY09 FY10 FY11 FY12E FY13E FY14E

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers

January 30, 201

Dabur India | 3QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Dabur India No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

January 30, 201

10