BUY INDUSTRY FMCG Riding We recently interacted with the ......company has started ‘Project Lakshya’ so as to improve service levels (to distribution), reduce logistics cost and

COMPANY UPDATE 23 AUG 2018

Dabur India

BUY

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters

Riding the ‘naturals’ wave We recently interacted with the management of Dabur and got an opportunity to meet the new India CEO (Mohit Malhotra). We observed that Dabur’s business strategy seems agile now (outperform market) vs. defensive in nature (riding with the tide). Management is focusing on (1) Driving innovation and renovation for market leadership, (2) Regionalisation to be more consumer centric, (3) Channel focus strategy, (4) Cost optimization with improving service levels and (5) Capability improvement.

Dabur is being opportunistic of taking advantage of consumer preference shifting towards naturals/Ayurvedic space. Dabur’s large share of product portfolio caters to this consumer shift (fruit juices included in naturals wave).

As per the management, oral care market can potentially be 65-70% naturals (high conviction for 50% levels) vs. 25% currently. Dabur’s oral care performance has already been strong with market share gains in the last 2 years. With incremental shift towards naturals, Dabur can sustain strong growth in oral care (particularly when Patanjali’s pressure has eased out and Colgate which is yet to get their strategy right on naturals).

Dabur is also focusing on regionalization approach to be more consumers centric. We noted that most FMCG companies are following this cluster based approach, to gain market share from regional players. HUL’s has been successful with the similar strategy and has focused on upgrading consumers based on the consumer profile. We believe Dabur will also get an opportunity to launch new products (like premium toothpaste, hair oil, shampoo, juices).

The company is also focusing on distribution expansion (mainly in rural), Dabur aims to increase direct reach to 1.2mn outlets vs. 1.02mn in FY18 and 0.91mn in FY17. E-commerce and MT (combined contribute 14% of domestic revenue) are already growing faster than GT.

Dabur has been our top pick to play the revival in rural consumption and it is playing out well. Govt.’s impetus towards accelerating economy (mainly rural) would further push consumption. Dabur’s ambitious plans are to leverage this recovery with aggressive product launches (natural’s space), higher investment in core portfolio (Shampoo, Skincare, Beverages etc) to attain scalability and distribution ramp up. We increase our EPS by ~4% for FY19-21E. We expect Dabur to deliver revenue/EBITDA/APAT of 15/21/24% CAGR over FY18-FY21E. We value Dabur at 38x P/E to 2-year forward EPS to derive TP of Rs 498 (earlier Rs 461). Maintain BUY. Near-term: Dabur is one of our top-picks to play the rural

recovery (~45% rev. from rural). With improving consumer

sentiments, we believe it will lead to healthy earnings growth in the ensuing quarters too.

Financial Summary (Consolidated) (Rsmn) FY17 FY18 FY19E FY20E FY21E

Net Sales 76,136 77,219 89,972 103,162 118,139 EBITDA 15,089 16,174 19,983 24,132 28,560 APAT 12,769 13,663 17,341 21,411 25,446 EPS (Rs) 7.25 7.76 9.84 12.16 14.45 P/E (x) 63.2 59.0 46.5 37.7 31.7 EV / EBITDA (x) 52.3 48.4 39.2 32.1 26.7 RoIC 47.1 46.9 53.6 60.7 68.3 Source: Company, HDFC sec Inst Research

INDUSTRY FMCG

CMP (as on 21 Aug 2018) Rs 458

Target Price Rs 498

Nifty 11,357

Sensex 38,359

KEY STOCK DATA

Bloomberg DABUR IN

No. of Shares (mn) 1,766

MCap (Rsbn)/(US$ mn) 808/11,555

6m avg traded value (Rsmn) 752

STOCK PERFORMANCE (%)

52 Week high / low Rs 429 / 293

3M 6M 12M

Absolute (%) 15.6 22.1 41.6

Relative (%) 8.7 17.4 26.1

SHAREHOLDING PATTERN (%)

Promoters 67.88

FIs & Local MFs 8.04

FPIs 17.66

Public & Others 6.42

Source : BSE

Naveen Trivedi [email protected] +91-22-6171-7324

Siddhant Chhabria [email protected] +91-22-6171-7330

DABUR INDIA : COMPANY UPDATE

Page | 2

Business Strategy (1) Driving innovation and renovation for market leadership (2) Regionalisation (3) Channel focus strategy (4) Cost optimization and improving service levels (5) Capability improvement

(1) Driving innovation and renovation for market leadership Focus on Core Brands: Dabur has large product basket in its core portfolio and the company wants to drive the core biz by innovation and renovation to further strengthen the leadership. The core brands are Red Toothpaste, Amla Hair Oil, Chyawanprash, Lal Tail, Honitus, Real Juice, Honey and Pudin Hara.

Creating Competitive Leverage: Dabur aims to be competitive with (1) Larger claims for brands like Glucose D, Fem, Gulabari, (2) Superior Formulation for brands like Lal Tail, Almond oil and Amla oil and (3) Improving packaging.

Build bigger brands: Dabur has more than 15 brands (Pudin Hara, Hingoli, Odopic, Sanifresh, Odomos, Active Juice, Almond Hair Oil, etc) <Rs 1bn which have the potential to be >Rs 1bn, these are low hanging fruits for Dabur. The company plans to focus on 2 brands per year.

Market Share (Volume) – MAT July’18

Source: Company, HDFC sec Inst Research

+10bps YoY

+30bps YoY

+231bps YoY

+30bps YoY

+207bps YoY

+70bps YoY+30bps YoY

-30bps YoY

0

10

20

30

40

50

60

Too

thp

aste

Dig

est

ive

Ta

ble

ts

MR

C

Hai

r O

ils

Ch

yaw

anp

rash

Air

Fre

shn

ers

Juic

es

&

Ne

ctar

s

Sham

po

os

%

Driving NPDs


Page | 3

(2) Regionalisation

Dabur is focusing on regionalization approach to be more consumer centric. We noted that most FMCG companies are following this cluster based approach, to gain market share from regional players. HUL has been successful with the similar strategy and has focused on upgrading consumers based on their consumer profile. We believe Dabur will also get an opportunity to launch new products (like premium toothpaste, hair oil, shampoo, juices).

Regionalisation



Page | 4

(3) Channel focus strategy

After being impacted by GST implementation (wholesale disrupted), Dabur has increased its focus on distribution primarily in rural areas. Dabur aims to increase direct reach to 1.2mn outlets vs. 1.02mn in FY18 and 0.91mn in FY17. E-commerce and MT (combined contribute 14% of domestic revenue) are already growing faster than GT.

Channel Focus Strategy



Page | 5

Direct Reach (No. of outlets) Increase in Lines Sold in Rural



Change in Channel Mix (%)


916,869 910,095 912,332

1,022,974

Jan-15 Jan-16 Jan-17 Jan-18

17.3

17.9

18.6

19.3

20.0

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19

24.5

21.7

11.6

0.6

10.1

23.5 23

12.5

0.8

8.7

22.223.6

12.8

1.2

7.7

0

5

10

15

20

25

30

Wholesale Superstockist MT E-comm Enterprise

The company is also focusing on distribution expansion (mainly in rural), Dabur aims to increase direct reach to 1.2mn outlets vs. 1.02mn in FY18 and 0.91mn in FY17


Page | 6

(4) Cost optimisation and improving service levels

Dabur is driving several initiatives for cost optimisation and lead time to reduce its working capital requirement. The company has started ‘Project Lakshya’ so as to improve service levels (to distribution), reduce logistics cost and lower inventory levels. Consistent efforts have already brought down inventory levels at the channel level.




Page | 7

(5) Capability improvement

Dabur’s focus area is not only for the external but also improvising internal capabilities. The company is strengthening the core team and creating several responsibility heads to further developing bridge between external focus and internal capability improvement.




Page | 8

Recent Performance Quarterly Financials Year to March (Rsmn) Q1FY19 Q1FY18 YoY (%) Q4FY18 QoQ (%) FY18 FY17 YoY (%)

Net Revenue 20,807 17,901 16.2 20,329 2.3 77,483 77,014 0.6

Material Expenses 10,486 9,145 14.7 10,024 4.6 38,464 38,432 0.1

Employee Expenses 2,241 2,035 10.1 1,807 24.0 7,928 7,896 0.4

Advertisement and Publicity 1,990 1,500 32.7 1,256 58.4 6,067 6,461 (6.1)

Other Operating Expenses 2,229 2,131 4.6 2,390 (6.7) 8,850 9,135 (3.1)

EBITDA 3,861 3,089 25.0 4,852 (20.4) 16,174 15,089 7.2

Depreciation 427 391 9.4 426 0.3 1,622 1,429 13.5

EBIT 3,434 2,699 27.2 4,426 (22.4) 14,553 13,661 6.5

Other Income 737 813 (9.4) 732 0.6 3,052 2,984 2.3

Interest Cost 149 133 12.0 132 12.4 531 540 (1.8)

PBT before exceptional 4,022 3,379 19.0 5,026 (20.0) 17,074 16,104 6.0

Exceptional - (145) na - na (146) - na

PBT 4,024 3,238 24.3 5,024 (19.9) 16,931 16,107 5.1

Tax 724 589 22.9 1,052 (31.2) 3,354 3,303 1.5

PAT before minority interest 3,300 2,649 24.6 3,972 (16.9) 13,577 12,803 6.0

Minority Interest 7.8 7.2 8.3 9.8 (20.4) 33.5 33.7 (0.6)

PAT 3,292 2,642 24.6 3,962 (16.9) 13,544 12,769 6.1

APAT 3,292 2,761 19.2 3,962 (16.9) 13,663 12,766 7.0

EPS 1.9 1.6 18.9 2.2 (17.1) 7.8 7.2 7.0

Margin (% of sales) Q1FY19 Q1FY18 YoY (bps) Q4FY18 QoQ (bps) FY18 FY17 YoY (bps)

Material Expenses 50.4 51.1 (69) 49.3 109 49.6 49.9 (26)

Employee Expenses 10.8 11.4 (60) 8.9 188 10.2 10.3 (2)

ASP Expenses 9.6 8.4 118 6.2 338 7.8 8.4 (56)

Other Operating Expenses 10.7 11.9 (119) 11.8 (104) 11.4 11.9 (44)

EBITDA 18.6 17.3 130 23.9 (531) 20.9 19.6 128

Tax Rate 18.0 18.2 (20) 20.9 (296) 19.8 20.5 (70)

APAT Margin 15.8 15.4 40 19.5 (367) 17.6 16.6 106


Consolidated constant currency revenue growth, adjusted for GST, was at 19.6% Domestic business grew by 24% (exp. of 13.4%) supported by all time high volume growth of 21% International biz grew by 10.5% on constant currency basis owing to favourable base (-2% in 1QFY18) and improving consumption dynamics GM was up by 69bps on account of lower promotional costs and favourable product mix Despite 32% growth in A&P (-24% in 1QFY18), EBITDA margins expanded by 130bps (exp. of 101bps)


Page | 9

Quarterly Segmental Year to March (Rsmn) Q1FY19 Q1FY18 YoY (%) Q4FY18 QoQ (%) FY18 FY17 YoY (%)

Consumer Care Business 16,561 14,251 16.2 16,774 (1.3) 64,141 47,780 34.2

Foods 3,635 3,108 17.0 2,934 23.9 10,977 8,162 34.5

Retails 304 278 9.1 279 8.9 1,143 925 23.5

Others 230 208 10.5 248 (7.6) 970 843 15.2

Unallocated other operating revenue 78 55 40.4 94 (16.8) 252

Total 20,807 17,900 16.2 20,329 2.3 77,483 57,710 34.3

Segmental EBIT


Foods 519 325 59.8 554 (6.2) 1,581 1,088 45.4

Retails 13 5 na 4 197.6 31 (12) na

Others 20 (15) (233.6) 17 14.0 28 35 (20.4)

Total 4,341 3,517 23.4 4,862 (10.7) 17,602 12,705 38.5

Less:

(a) Interest Cost & Bank Charges 149 133 12.0 132 12.4 531 423 25.3

(b) Other Un-allocable Expenses 170 6 na (296) (157.4) (2) 491 na

PBT 4,022 3,378 19.0 5,026 (20.0) 17,074 11,790 44.8

Capital Employed

Consumer Care Business 22,529 21,753 3.6 22,444 0.4 22,529 21,753 3.6

Foods 3,231 4,801 (32.7) 3,344 (3.4) 3,231 4,801 (32.7)

Retails 296 276 7.5 288 3.0 296 276 7.5

Others 287 355 (19.2) 216 32.8 287 355 (19.2)

Total 26,343 27,185 (3.1) 26,292 0.2 26,343 27,526 (4.3)

Unallocable Capital Employed 34,416 24,283 41.7 31,038 10.9 34,416 24,283 41.7

Total Capital Employed 60,759 51,469 18.1 57,331 6.0 60,759 51,469 18.1



EBIT Margin Year to March (Rsmn) Q1FY19 Q1FY18 YoY (bps) Q4FY18 QoQ (bps) FY18 FY17 YoY (bps)

Consumer Care Business 22.9 22.5 41 25.6 (268) 24.9 24.3 62

Foods 14.3 10.5 383 18.9 (458) 14.4 13.3 108

Retails 4.1 1.7 243 1.5 261 2.7 (1.3) 406

Others 8.5 (7.0) 1,553 6.9 161 2.9 4.2 (129)

Total 20.9 19.6 121 23.9 (306) 22.7 22.0 70


Segmental growth is based on reported numbers. Foods margins revived owing to favourable base (-483bps in 1QFY18), freight benefits (GST) and benign input costs


Page | 10

Revenue Contribution (1QFY19) Revenue Contribution (FY18)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Revenue growth Domestic Value and Volume Growth Trajectory

Source: Company, HDFC sec Inst Research Note: International revenue growth is on constant currency basis


Domestic biz (67.8% in 1QFY19 vs. 65.9% in 1QFY18) continued to take share from international biz Rural wholesale grew by 24% YoY vs. urban wholesale growing by 8%. Pre-GST urban wholesale used to feed in rural pockets. For the FMCG sector rural is now growing ~300bps faster than urban (~500bps historical levels) vs. ~150-200bps in FY18 Domestic business is witnessing consistent recovery driven by volume growth. We expect double digit value growth in the medium term

Domestic

67.8

International30.3

Others

1.9

(%)

Domestic

68.5

International27.9

Others

3.6

(%)

2

(7)

1

(5)

10

18

10

24

(2)

0

(5)(2)

4 5

17

11

(10)

(4)

2

8

14

20

26

2Q

FY1

7

3QFY

17

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

Domestic International(%)

1 2

(7)

1

(5)

10

18

10

24

4 5

(5)

2

(4)

7

13

8

21

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

Value growth Volume growth (%)


Page | 11

Domestic Revenue Mix (1QFY19) Domestic Revenue Mix (FY18)


Remarkable performance by Dabur’s oral care segment during a challenging period (expected to clock Rs 10.5bn in FY19 vs. ~Rs 8bn in FY17) Hair care revenue mix is constant YoY Food increased from 21.9% in Q1 FY18 to 22.3% in Q1 FY19 Dabur Honey has grown by 33/24/42% YoY during 3QFY18/4QFY18/1QFY19 which signals declining competitive intensity from Patanjali

Hair Care

23

Health

Supplement12

Foods

22

Oral Care

17

OTC &

Ethicals7

Home Care

7

Skin Care

5

Digestives

6(%)

Hair Care

21

Health

Supplement17

Foods

18

Oral Care

17

OTC &

Ethicals9

Home Care

7

Skin Care

5

Digestives

6(%)


Page | 12

Domestic Category Growth (YoY)

Categories 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 Wt.

Avg. FY17

Wt. Avg. FY18

Hair Care 10% 1% -5% -20% -4% -11% 2% 17% 9% 19% -6% 4%

Oral Care 18% 12% 0% -5% 9% 2% 23% 23% 11% 17% 4% 15%

- Toothpaste 20% 13% 4% 2% 9% 10% 26% 26% 14% 17% 7% 19%

Foods 12% 4% 15% 52% 10% -8% 12% 0% 2% 27% 18% 1%

Health Supplements -6% 0% -6% -14% 5% -7% 3% 20% 14% 28% -5% 10%

Home Care 19% 2% 20% 5% -7% 6% 10% 36% 0% 17% 6% 14%

OTC & Ethicals 7% -10% -9% -11% -4% -7% 6% 9% 9% 13% -8% 5%

Digestives 7% -16% -16% -10% 5% 4% 12% 19% 7% 22% -8% 10%

Skin Care 0% -2% 7% -11% 0% 4% 16% 15% 9% 27% -2% 11%


International Revenue Growth (CC basis) 1QFY19 Geography-wise Growth (CC basis)


Broad based growth during 1QFY19 Continued market share gain in Toothpaste is heartening Dabur Red toothpaste is now a Rs 5bn brand Oral care, Home care, Skin care and Digestives reported double digit value growth in FY18 in a turbulent environment Encouraging to see recovery in Hair care, Foods and OTC & Ethicals after a disappointing FY18 Favorable base for most categories would play key role in the coming quarters Most of the geographies witnessed a turnaround in 1QFY19 with favourable base, stabilizing currency and improving consumer confidence index

6.0

(2.3)

-

(4.5)(2.2)

3.9 5.0

16.8

11.0

-8.0

0.0

8.0

16.0

24.0

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3QFY

18

4Q

FY1

8

1Q

FY1

9

(%)

31

17

40

54

1

37

-30

0

30

60

90

Egyp

t

GC

C

Paki

stan

Sau

dai

Ara

bia

Nam

aste

Ho

bb

y

(%)


Page | 13

Assumptions Particulars FY17 FY18 FY19E FY20E FY21E

Domestic Gr. (%) 1.0 5.2 16.0 14.0 14.5

Hair Care Gr. (%) (6.8) 4.2 13.8 11.6 13.0

Oral Care Gr. (%) 7.5 16.9 14.1 14.1 14.5

Health Supplements Gr. (%) (2.7) 10.4 14.5 15.7 16.0

OTC & Ethicals Gr. (%) (9.6) 5.2 12.2 13.3 14.0

Digestive Gr. (%) (11.4) 10.4 12.7 13.5 14.0

Home Care Gr. (%) 4.6 13.8 16.3 14.4 15.0

Skin Care Gr. (%) 5.3 11.0 15.2 14.7 15.0

Foods Gr. (%) 12.2 1.5 18.5 14.2 15.0

International Gr. (%) (5.0) (6.3) 15.0 14.0 14.0

Consolidated Revenue Gr. (%) (3.0) 1.4 16.5 14.7 14.5

Gross Margin (%) 50.7 50.5 50.9 51.6 51.8

ASP (% of sales) 8.5 7.9 8.1 8.0 8.0

Distribution (% of sales) 2.7 2.5 2.3 2.2 2.1

Employee (% of sales) 10.4 10.3 9.7 9.6 9.3

Other Expenses (% of sales) 9.3 9.0 8.6 8.5 8.3

EBITDA Margin (%) 19.8 20.9 22.2 23.4 24.2

Tax Rate (%) 20.5 20.5 20.5 20.5 20.5

Source: HDFC sec Inst Research

Change in Estimate

FY19E FY20E FY21E

New Old Change New Old Change New Old Change

Net Revenue 89,972 89,587 0.4% 103,162 101,139 2.0% 118,139 115,823 2.0%

EBITDA 19,983 19,786 1.0% 24,132 23,316 3.5% 28,560 27,594 3.5%

APAT 17,341 16,860 2.9% 21,411 20,429 4.8% 25,446 24,247 4.9%

EPS 9.8 9.6 2.9% 12.2 11.6 4.8% 14.4 13.8 4.9% Source: HDFC sec Inst Research


Page | 14

Peer Set Comparison

Company MCap

(Rs bn)

CMP (Rs)

Reco. TP

(Rs)

EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)

FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

HUL 3,780 1,750 NEU 1,709 29.4 35.5 42.7 59.4 49.3 41.0 41.4 34.8 29.3 71.4 73.8 74.4

ITC 3,783 310 BUY 367 10.1 11.1 12.3 30.8 27.9 25.3 19.5 17.3 15.5 37.9 40.1 43.0

GCPL 940 1,380 NR 1,160 26.7 31.3 37.3 51.6 44.2 37.0 38.7 32.9 27.7 20.5 23.2 27.3

Britannia 824 6,860 NEU 6,257 105.5 130.6 158.9 65.0 52.5 43.2 44.0 35.5 29.6 46.3 50.4 54.7

Dabur 807 458 BUY 498 9.8 12.2 14.4 46.5 37.7 31.7 39.2 32.1 26.7 53.6 60.7 68.3

Marico 465 360 BUY 388 8.2 10.6 12.4 44.0 33.9 29.1 31.7 25.0 21.5 46.2 56.7 62.5

Colgate 318 1,170 NEU 1,185 28.7 32.8 37.8 40.7 35.7 31.0 24.9 21.3 18.4 69.6 81.9 96.1

Emami 258 565 BUY 648 14.3 17.2 20.5 39.4 32.9 27.5 28.8 24.3 20.5 29.0 37.7 48.4

Jub. Food 201 1,520 BUY 1,562 25.8 31.8 39.2 58.8 47.8 38.8 31.5 26.1 21.8 56.6 71.9 89.2 Source: HDFC sec Inst Research


Page | 15

Income Statement (Rsmn) FY17 FY18 FY19E FY20E FY21E

Net Revenues 76,136 77,219 89,972 103,162 118,139

Growth (%) (3.0) 1.4 16.5 14.7 14.5

Material Expenses 37,554 38,199 44,148 49,938 56,891

Employee Expense 7,896 7,928 8,770 9,864 10,949

ASP Expense 6,461 6,067 7,282 8,229 9,422

Distribution Expense 2,039 1,914 2,050 2,248 2,456

Other Expenses 7,096 6,936 7,739 8,750 9,862

EBITDA 15,089 16,174 19,983 24,132 28,560

EBITDA Growth (%) (0.6) 7.2 23.5 20.8 18.3

EBITDA Margin (%) 19.8 20.9 22.2 23.4 24.2

Depreciation 1,429 1,622 1,747 1,928 2,080

EBIT 13,661 14,552 18,236 22,204 26,479

Other Income (inc EO Items) 2,984 3,052 4,072 5,050 6,173

Interest 540 531 484 322 127

PBT 16,104 17,073 21,823 26,932 32,526

Total Tax 3,303 3,354 4,474 5,521 7,080

Adjusted PAT 12,769 13,663 17,341 21,411 25,446

APAT Growth (%) 2.0 7.0 26.9 23.5 18.8

Adjusted EPS (Rs) 7.2 7.8 9.8 12.2 14.4

EPS Growth (%) 1.8 7.0 26.9 23.5 18.8 Source: Company, HDFC sec Inst Research

Balance Sheet (Rsmn) FY17 FY18 FY19E FY20E FY21E

SOURCES OF FUNDS

Share Capital - Equity 1,762 1,762 1,762 1,762 1,762

Reserves 46,712 55,304 59,373 72,289 87,117

Total Shareholders Funds 48,474 57,065 61,134 74,051 88,879

Minority Interest 248 265 258 258 258

Long Term Debt 4,741 3,686 2,686 1,686 686

Short Term Debt 5,090 5,766 4,766 3,266 1,266

Total Debt 9,831 9,452 7,452 4,952 1,952

Net Deferred Taxes 1,080 1,091 1,091 1,091 1,091 Other Non-current Liabilities & Provns 534 565 622 684 752

TOTAL SOURCES OF FUNDS 60,167 68,438 70,556 81,035 92,931

APPLICATION OF FUNDS

Net Block 19,584 20,281 20,691 21,763 22,182

CWIP 1,011 522 876 888 901

Other Non Current Assets 581 490 954 1,049 1,154

Total Non-current Assets 21,177 21,293 22,521 23,700 24,238

Inventories 11,067 12,562 14,464 16,330 18,521

Debtors 6,504 7,061 8,227 9,433 10,803

Other Current Assets 3,125 4,988 5,334 5,706 6,106

Cash & Equivalents 35,450 41,112 41,074 49,611 59,994

Total Current Assets 56,146 65,723 69,099 81,080 95,424

Creditors 15,852 17,094 19,473 22,046 24,922

Other Current Liabilities & Provns 1,304 1,484 1,592 1,700 1,808

Total Current Liabilities 17,156 18,578 21,065 23,745 26,731

Net Current Assets 38,990 47,145 48,034 57,334 68,693

TOTAL APPLICATION OF FUNDS 60,167 68,438 70,556 81,035 92,931 Source: Company, HDFC sec Inst Research


Page | 16

Cash Flow Statement (Rsmn) FY17 FY18 FY19E FY20E FY21E

Reported PBT 16,107 16,931 21,823 26,932 32,526

Non-operating & EO Items (3,224) (2,262) (8) - -

Interest Expenses 307 424 484 322 127

Depreciation 1,429 1,622 1,747 1,928 2,080

Working Capital Change 872 (2,575) (1,346) (808) (1,025)

Tax Paid (3,221) (3,249) (4,474) (5,521) (7,080)

OPERATING CASH FLOW ( a ) 12,269 10,890 18,227 22,853 26,628

Capex (4,858) (2,003) (2,500) (3,000) (2,500)

Free Cash Flow (FCF) 7,411 8,887 15,727 19,853 24,128

Investments (5,111) (5,837) (2,500) (2,500) (2,500)

Non-operating Income 1,900 2,437 - - -

INVESTING CASH FLOW ( b ) (8,069) (5,402) (5,000) (5,500) (5,000)

Debt Issuance/(Repaid) 1,682 (545) (2,000) (2,500) (3,000)

Interest Expenses (450) (428) (484) (322) (127)

FCFE 2,969 6,461 15,711 20,175 24,755

Share Capital Issuance 149 - 0 (0) (0)

Dividend (4,770) (4,770) (13,273) (8,494) (10,618)

Others - - - - -

FINANCING CASH FLOW ( c ) (3,390) (5,744) (15,757) (11,316) (13,745)

NET CASH FLOW (a+b+c) 811 (256) (2,530) 6,037 7,883

EO Items, Others 1,251 269 (8) - (0)

Closing Cash & Equivalents 3,048 3,061 523 6,559 14,442 Source: Company, HDFC sec Inst Research

Key Ratios FY17 FY18 FY19E FY20E FY21E

PROFITABILITY (%)

GPM 50.7 50.5 50.9 51.6 51.8

EBITDA Margin 19.8 20.9 22.2 23.4 24.2

EBIT Margin 17.9 18.8 20.3 21.5 22.4

APAT Margin 16.8 17.7 19.3 20.8 21.5

RoE 28.4 25.9 29.3 31.7 31.2

RoIC (or Core RoCE) 47.1 46.9 53.6 60.7 68.3

RoCE 24.2 22.4 26.0 29.1 29.8

EFFICIENCY

Tax Rate (%) 20.5 20.5 20.5 20.5 20.5

Fixed Asset Turnover (x) 2.7 2.5 2.8 2.9 3.1

Inventory (days) 53.1 59.4 58.7 57.8 57.2

Debtors (days) 31.2 33.4 33.4 33.4 33.4

Other Current Assets (days) 15.0 23.6 21.6 20.2 18.9

Payables (days) 76.0 80.8 79.0 78.0 77.0

Other Current Liab&Provns (days) 6.3 7.0 6.5 6.0 5.6

Cash Conversion Cycle (days) 17.0 28.5 28.2 27.3 26.9

Net D/E (x) -0.53 -0.55 -0.55 -0.60 -0.65

Interest Coverage (x) 0.04 0.04 0.03 0.01 0.00

PER SHARE DATA (Rs)

EPS 7.2 7.8 9.8 12.2 14.4

CEPS 8.1 8.7 10.8 13.2 15.6

Dividend 2.3 6.3 4.0 5.0 6.0

Book Value 27.5 32.4 34.7 42.0 50.5

VALUATION

P/E (x) 63.2 59.0 46.5 37.7 31.7

P/BV (x) 16.6 14.1 13.2 10.9 9.1

EV/EBITDA (x) 52.3 48.4 39.2 32.1 26.7

EV/Revenues (x) 10.4 10.1 8.7 7.5 6.5

OCF/EV (%) 1.6 1.4 2.3 3.0 3.5

FCF/EV (%) 0.9 1.1 2.0 2.6 3.2

FCFE/Mkt Cap (%) 0.4 0.8 1.9 2.5 3.1

Dividend Yield (%) 0.5 1.4 0.9 1.1 1.3 Source: Company, HDFC sec Inst Research


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RECOMMENDATION HISTORY

Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target

25-Sep-17 305 BUY 352

10-Oct-17 316 BUY 352

1-Nov-17 333 BUY 380

13-Nov-17 341 BUY 380

27-Dec-17 353 BUY 406

12-Jan-18 359 BUY 401

1-Feb-18 356 BUY 401

28-Feb-18 340 BUY 405

11-Apr-18 338 BUY 399

2-May-18 371 BUY 410

9-Jul-18 380 BUY 423

1-Aug-18 420 BUY 461

23-Aug-18 458 BUY 498

200

250

300

350

400

450

500

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

De

c-1

7

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

Dabur TP


Page | 18

Disclosure: We, Naveen Trivedi, MBA & Siddhant Chhabria, PGDBM, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock –No HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published for any purposes without prior written approval of HSL. Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: [email protected] Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE-INB/F/E 231109431, BSE-INB/F 011109437, AMFI Reg. No. ARN: 13549, PFRDA Reg. No. POP: 04102015, IRDA Corporate Agent License No.: HDF 2806925/HDF C000222657, SEBI Research Analyst Reg. No.: INH000002475, CIN - U67120MH2000PLC152193 Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

mailto:[email protected]


Page | 19

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