2QFY2013 Result Update | FMCG

October 31, 2012

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

NEUTRAL
CMP Target Price
Investment Period
2QFY12 1,262 237 18.7 174 % yoy 20.6 11.8 (137) 16.4 1QFY13 1,462 206 14.1 159 % qoq 4.1 28.3 327 27.1

`124 -

2QFY13 1,523 264 17.4 202

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 21,656 193.0 0.3 140/92 156,997 1 18,505 5,620 DABU.BO DABUR@IN

For 2QFY2013, Dabur India (Dabur) posted a 20.6% yoy growth in its top-line to `1,523cr, driven by a mix of volume and value growth. The companys net profit rose by 16.4% to `202cr aided by a reasonably strong operational performance. Key highlights: Dabur posted a 20.6% yoy growth in net sales to `1,523cr,

which was in line with our estimates. The domestic consumer business reported a growth of 15.3%, driven by a mix of volume and price increases, with the volume growth coming in at around 9%. During the quarter, the domestic sales were affected due to lower procurement by canteen sales division (CSD) due to budget rationalization. The international business grew by 24.8% yoy during the quarter. The growth in the international business was aided by translation gains due to INR depreciation. On a constant currency terms international business rose by 16% yoy. Although the gross margin improved by 56bp yoy due to the cooling of raw material prices, the companys advertising expenses went up by 175bp on a yoy basis, resulting in the OPM contracting by 137bp.
Outlook and valuation: We expect Daburs top-line to post a ~15.9% CAGR over FY201214E. The bottom-line is expected to post an 18.9% CAGR, aided by topline growth and margin expansion. At the current market price, the stock is trading at 23.8x 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

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 68.7 5.4 19.6 6.4

Abs. (%) Sensex Dabur

3m 7.4 4.2

1yr 4.5 23.0

3yr 16.4 63.6

FY2011 4,110 21.2 573.1 14.5 18.7 3.3 37.8 15.5 49.3 38.2 5.5 29.1

FY2012 5,284 28.5 644.1 12.4 16.4 3.7 33.6 12.6 41.4 28.7 4.1 25.2

FY2013E 6,124 15.9 777.8 20.8 17.0 4.5 27.8 11.5 43.2 32.3 3.6 21.2

FY2014E 7,101 15.9 910.3 17.0 16.8 5.2 23.8 9.1 42.6 34.9 3.1 18.2

V Srinivasan
022-39357800 Ext: 6831 v.srinivasan@angelbroking.com

Please refer to important disclosures at the end of this report

Dabur India | 2QFY2013 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

1QFY13 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 1.2

1QFY12 1,262 631 50.0 101 8.0 128 10.1 166 13.1 1,026 237 18.7 17 22 19 217 217 17.2 43 19.7 174 (0.0) 174 13.8 174 1.0

% yoy 20.6 19.3 19.5 41.5 23.0 22.7 11.8 (137) 24.4 45.7 15.5 15.5 8.7 17.1 16.4

4QFY12 1,462 732 50.0 106 7.3 229 15.7 189 12.9 1,256 206 14.1 21 27 34 192 (4.93) 197 13.5 38 19.1 160 0.2 159 10.9 174

% qoq 4.1 2.8 14.1 (21.1) 7.9 0.2 28.3 327 1.2 (19.4) 30.0 26.8 22.9 27.7 27.1

FY2012 2,985 1,484 49.7 227 7.6 410 13.7 397 13.3 2,519 466 15.6 36 54 61 437 437 14.7 84 19.2 353 1.5 352 11.8 174

FY2011 2,467 1,267 51.4 189 7.7 279 11.3 313 12.7 2,049 418 16.9 30 50 39 377 377 15.3 75 19.9 302 0.2 302 12.2 174 1.7

% chg 21.0 17.1 20.1 46.8 26.7 22.9 11.5 (133) 21.2 7.3 58.9 16.1 16.1 12.3 17.1 16.6

16.4

0.9

27.0

2.0

16.6

Exhibit 2: 2QFY2013 Actual vs Angel estimates

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

Actual 1,523 264 17.4 202

Estimates 1,531 258 18.1 190

Variation (%) (0.6) 2.5 (69)bp 6.3

October 31, 2012

Dabur India | 2QFY2013 Result Update

Top-line up 20.6% yoy

Dabur posted a strong top-line growth of 20.6% yoy to `1,523cr. During the

quarter, the domestic sales were affected due to lower procurement by CSD due to budget rationalization. The international business grew by 24.8% yoy during the quarter. The growth in the international business was aided by translation gains due to INR depreciation. Volume growth in the domestic consumer business stood at 9%. Exhibit 3: Top-line grows 20.6% yoy
1,600 1,400 1,200 1,000 (` cr) 800 600 1,080 1,108 1,205 1,262 1,453 1,364 1,462 1,523 400 200 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 973 40.0 35.0 30.0 20.0 15.0 10.0 5.0 (yoy %) 25.0

Exhibit 4: Volume growth moderates to 9%

16.0 14.0 12.0 10.0 (%) 8.0 6.0 4.0 2.0 0.0 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 25.0 20.0 (yoy %) 15.0 10.0 160 154 147 128 174 173 171 149 5.0 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 14.0 12.7 10.0 8.6 10.0 10.8 12.4 11.0 9.0

Top-line (LHS)

yoygrowth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Gross margin expands 56bp yoy, OPM down by 137bp yoy

Although the gross margin improved by 56bp yoy due to the cooling of raw material prices, the companys advertising expenses went up by 175bp on a yoy basis, resulting in the OPM contracting by 137bp yoy

Net profit grows by 16.4% yoy

Daburs reported net profit for the quarter grew 16.4% yoy to `202cr aided by a reasonably strong operational performance.

Exhibit 5: OPM dips by 137bp yoy

60.0 50.0 40.0 30.0 20.0 10.0 2Q11 3Q11 12.5 12.5 20.9 19.4 19.1 14.2 12.6 1Q12 18.7 52.9 51.6 53.0 47.8 50.0 49.0 49.8 50.0 50.6

Exhibit 6: Healthy 16.4% yoy growth in Net Profit

260 210 160 110 60 11.9 2Q13 10

15.2 13.6 3Q12

15.8

14.1 15.7 1Q13

17.4

(` cr)

(%)

11.5 4Q11

10.1 2Q12

13.4 4Q12

OPM

Gross margin

A&P Spends

PAT (LHS)

yoy growth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

October 31, 2012

202

Dabur India | 2QFY2013 Result Update

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 2QFY13 2QFY12 % chg 1QFY13 1QFY12 1HFY13 1HFY12 % chg 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 1,262 1066.6 148.3 9.48 37.95 273 240.1 33.4 (2.7) 21.7 22.5 22.5 (28.9) 7.3 20.6 18.5 18.5 48.8 81.7 20.1 20.7 (0.1) 9.5 1,462 1175 211.5 13.27 62.37 275 239.7 33.4 (2.4) 4.4 18.8 20.4 15.8 (18.1) 7.0 4.1 7.6 (16.9) 6.3 10.6 19.4 20.8 (0.1) 25.0 92.4 2,985 2,439 387 27 131 604 529 67 (5) 13 20.2 21.7 17.2 (19.7) 9.7 2,467 2,083 304 18 507 451 58 (5) 20.5 21.6 19.1 (30.1) 5.1 21.0 17.1 27.4 53.2 19.1 17.5 15.0 0.0

62 183.2

2.8 202.5

3 300.6

Source: Company, Angel Research

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. We model in a 15.9% CAGR in revenue over FY2012-14E, with health supplements, home care and foods leading 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 a ~15.9% CAGR over FY201214E. The bottom-line is expected to post an 18.9% CAGR, aided by top-line growth and margin expansion. At the current market price, the stock is trading at 23.8x FY2014E EPS. We recommend a Neutral rating on the stock.

October 31, 2012

Dabur India | 2QFY2013 Result Update

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)
37,110 5,775 17,462 21,624 24,628 12,710 118,331 221,104 12,867 45,154 9,291

CMP (`)
3,869 483 1,284 124 724 3,022 547 283 209 4,683 150

TP (R`)
584 -

Upside (%)
21 -

P/E (x) FY13E FY14E

31.3 23.4 36.0 27.8 33.1 27.1 37.1 30.3 30.9 40.8 22.7 26.4 19.1 30.3 23.8 27.4 22.9 32.1 25.9 24.8 33.5 19.2

EV/Sales (x) FY13E FY14E

3.2 0.9 5.6 3.5 4.2 3.6 4.5 7.2 2.7 5.2 1.2 2.7 0.7 4.9 3.0 3.5 3.1 3.9 6.2 2.2 4.3 1.1

RoE (%) FY13E FY14E

37.4 43.1 101.0 43.2 25.5 36.3 70.9 35.4 31.4 71.2 8.6 35.3 41.9 93.5 41.4 25.4 32.8 59.8 34.7 29.7 60.3 9.5

CAGR # Sales EPS

17.0 17.4 12.8 15.9 22.1 16.8 15.5 17.2 18.6 16.5 9.7 19.2 27.4 13.6 18.9 28.3 24.9 19.7 17.7 27.6 15.0 16.6

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

Exhibit 9: One year forward PE

40.0 35.0 30.0 25.0 (x) 20.0 15.0 10.0 5.0 Apr-09 Apr-10 Apr-11 Oct-08 Oct-09 Oct-10 Oct-11 Apr-12 Feb-09 Feb-10 Feb-11 Aug-09 Aug-10 Aug-11 Feb-12 Aug-12 Dec-08 Dec-09 Dec-10 Dec-11 Oct-12 Jun-09 Jun-10 Jun-11 Jun-12

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

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.

October 31, 2012

Dabur India | 2QFY2013 Result Update

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 6,124 15.0 5,083 2,921 857 484 821 1,041 14.4 17.0 103 938 16.3 15.3 51 74 8.1 960 15.4 960 182 19.0 778 (0.8) 779 779 13.4 12.7 4.5 4.5 20.7 FY14E 7,101 15.9 5,911 3,401 994 561 954 1,190 14.3 16.8 110 1,079 15.1 15.2 41 86 9.5 1,124 17.0 1,124 214 19.0 910 (0.8) 911 911 17.0 12.8 5.2 5.2 17.0

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

October 31, 2012

Dabur India | 2QFY2013 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 advances 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 2,450 606 1,844 61 583 300 2,394 342 167 1,327 2,010 383 72 2,942 2,630 716 1,913 66 683 300 2,763 459 67 1,538 2,252 511 72 3,244 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 1,713 1,887 3 1,023 27 2,942 174 2,215 2,390 3 823 27 3,244 FY09 FY10 FY11 FY12 FY13E FY14E

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

October 31, 2012

Dabur India | 2QFY2013 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 960 103 28 51 182 (68) 892 (340) (100) (440) (100) 408 51 (559) (106) 448 342 FY14E 1,124 110 (54) 41 214 43 1,051 (185) (100) (285) (200) 408 41 (649) 118 342 459

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

October 31, 2012

Dabur India | 2QFY2013 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 58 2 2.5 57 32 64 14 47.2 47.4 54.4 52.3 51.6 57.1 38.2 35.4 49.3 28.7 27.1 41.4 32.3 30.2 43.2 28.7 27.1 41.4 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 10.8 5.2 5.2 5.9 2.0 13.7 55.3 24.4 13.1 1.4 7.7 46.2 20.5 43.2 19.4 11.5 1.6 6.4 34.4 19.2 37.8 33.0 15.5 0.9 5.5 29.1 9.1 33.6 29.0 12.6 1.2 4.1 25.2 7.6 27.8 24.6 11.5 1.6 3.6 21.2 7.5 23.8 21.2 9.1 1.6 3.1 18.2 7.6 FY09 FY10 FY11 FY12E FY13E FY14E

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

October 31, 2012

Dabur India | 2QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

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%)

October 31, 2012

10