Dabur recorded strong 19.5% y-o-y growth in revenues at Rs7.4 billion – almost in line with our expectations of Rs7.2 billion.
During FY09, revenues surged by 18.7% y-o-y driven 13% by volume and ~5% by price increases.
The International Business Division registered 31.4% y-o-y growth led by robust performance in GCC (53% growth), Egypt (over 108%), Nigeria, Yemen and North African markets.
The retail venture registered revenues of Rs17.5mn and Rs59.7mn during Q4 FY09 and FY09 respectively.
Operating margin for the quarter expanded by 80bps to 18.2%. The expansion could have been even better but for the higher raw material and advertising cost. Most of the raw material prices have started softening, the benefits of which will be visible in the coming quarters.
Fem Care acquisition
During Q3 FY09, Dabur had acquired 72.15% stake in Fem Care Pharma Ltd (FCPL), a leading player in the women’s skin care products market, for Rs2.04 billion, in an all-cash deal.
The company has deposited the purchase consideration in the Escrow account to be paid to promoters on completion of the deal. It has made an open Offer for 20% equity stake and deposited 1% consideration amounting to Rs5.7 million in Open Offer Escrow Account.
The open offer will start in the first week of May while the company expects takeover process to be completed by June 2009.
Dabur plans to scale up its presence in the shampoo and skin care categories and enlarge its OTC portfolio, which is currently very small.
The company is also looking at aggressively expanding its homecare portfolio. The contribution of international business division has increased to 18.5% of the total revenues.
Dabur has set up 9 New-u stores under its beauty and wellness retail venture ‘new-u’. It has incurred cumulative losses of ~Rs220 million in this venture on an investment of Rs416mn over the past two years. Due to its weak positioning, this venture has received poor response from the customers.
We believe the company may look at exiting the business, which will help improve overall profitability.
We expect Dabur to witness a 15.4% CAGR in net profit over FY09-11. At Rs104, the stock is trading at 17.2x FY11E EPS of Rs6. We maintain MARKET PERFORMER rating with a price target of Rs107.