buy - hdfc securities - 3qfy20 - hdfc...- dabur amla hair oil mkt share grew 50bps. 80% of...

RESULTS REVIEW 3QFY20 31 JAN 2020

Dabur India BUY

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

Outperformance continues Dabur posted healthy 5.6% domestic volume growth (est 5%) despite weak consumer sentiments in rural India. Focused strategy on power brands, innovative launches and increase in rural reach is driving share gains. Rural growth outpaced urban by 400bps for Dabur (in contrast to industry). Oral care growth at 8.5% was much better than category growth and market leader (Colgate posted 4%). Health Supplements and Digestive also posted healthy 12% and 16% growth. Food remained muted due to category issue, will be keen to watch performance in upcoming season. Despite near term headwinds, we believe Dabur will outperform peers owing to (1) Focus on power brands, (2) Expanding addressable market, (3) Healthy growth in natural category, (4) Rising distribution reach and (5) Innovative launches. We value Dabur at 40x on Dec-21E EPS, arriving at a TP of Rs 510. Maintain BUY. HIGHLIGHTS OF THE QUARTER Domestic revenue/volume growth was in-line at 6/6%

despite heavy base (15/12% in 3QFY19, 5/5% in 2QFY20). Dabur’s rural growth outpaced urban growth by 440bps owing to distribution expansion and corrective strategies.

HPC/Health Care/Foods grew at 4/11/2%. Dabur gained healthy market share in categories like Oral care/Hair oil/Juices by 80/50/530bps respectively. Health care portfolio (41% mix) drove overall growth led by (1) Market share gains in Chyawanprash (>300bps) and Glucose (>100bps), (2) Strong 16% growth in digestive and (3)

Distribution expansion and (3) High share of power brands. Foods continued to decline led by downtrading in beverages (aerated drinks and dairy beverages vs. juices). Diwali gift packs were also impacted by the shift in Diwali this year (from Nov-18 to Oct-19). Ex-Diwali Gift Packs, Juices grew by 5%. Dabur is now entering PET bottles to spur out-of-home consumption for juices and drinks. Co is also expanding number of SKUs and launching premium juices (Real Aloe Vera with Kiwi).

International business grew by 11.7% (12% cc growth) owing to robust growth in Hobi (32%) and Nepal (21%). Management remains confident to deliver mid-high single digit revenue growth.

GM expanded by 80bps owing to benign commodity inflation and richer mix. Employee/A&P/Other expenses grew by 3/14/7%. EBITDA grew by 11% and EBITDAM expanded by 70bps to 20.9% (in-line). APAT grew by 13% to Rs 4.14bn vs. exp of Rs 4.08bn.

STANCE Dabur has outperformed in a tough environment as its brand building initiatives are beginning to pay dividends. Mohit Malhotra is focusing on (a) Scaling power brands (8 brands with 65% revenue mix) which have a large addressable opportunity, (b) Deeper rural penetration led by higher direct reach (targeting 55k/60k villages in FY20/21) and (c) Innovation of new products. We remain optimistic for Dabur and expect co will be opportunistic in the rural recovery.

Financial Summary YE March (Rs mn) 3QFY20 3QFY19 YoY (%) 2QFY20 QoQ (%) FY18 FY19 FY20E FY21E FY22E Net Revenues 23,530 21,992 7.0 22,120 6.4 77,219 85,331 91,456 102,175 114,672 EBITDA 4,929 4,454 10.7 4,895 0.7 16,174 17,396 19,619 23,038 26,871 APAT 4,138 3,661 13.0 4,346 (4.8) 13,663 14,436 15,756 20,032 23,175 Diluted EPS (Rs) 2.34 2.07 13.0 2.46 (4.8) 7.76 8.20 8.92 11.34 13.12 P/E (x) 61.7 58.4 53.7 42.2 36.5 EV / EBITDA (x) 50.6 47.0 41.7 35.2 30.0 Core RoCE (%) 47.3 50.1 52.4 59.3 65.5

Source: Company, HDFC sec Inst Research

INDUSTRY FMCG CMP (as on 30 Jan 2020) Rs 479 Target Price Rs 510 Nifty 12,036 Sensex 40,914 KEY STOCK DATA Bloomberg DABUR IN No. of Shares (mn) 1,767 MCap (Rs bn) / ($ mn) 846/11,832 6m avg traded value (Rs mn) 819 STOCK PERFORMANCE (%) 52 Week high / low Rs 506/357 3M 6M 12M Absolute (%) 4.0 13.2 11.0 Relative (%) 1.8 3.8 (3.9) SHAREHOLDING PATTERN (%) Sep-19 Dec-19 Promoters 67.88 67.88 FIs & Local MFs 7.74 7.71 FPIs 17.64 17.48 Public & Others 6.74 6.93 Pledged Shares 0.00 0.00 Source : BSE

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

Aditya Sane [email protected] +91-22-6171-7336

DABUR INDIA: RESULTS REVIEW 3QFY20

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Dabur India Quarterly Commentary 4QFY19 1QFY20 2QFY20 3QFY20

Industry / Co Strategy

- Agrarian stress and liquidity crunch led to a general slowdown in the economy - Home Care market surged ahead of the company growth - Juices market saw a decline owing to weak sentiments and downtrading

- Demand was sluggish and the industry growth witnessed a slowdown in both urban and rural markets - Juice category saw a slowdown due to increased competitive intensity by milk based players - 70% of industry will get impacted by the new red dot (high sugar content) in the packaging regulations by FSSAI

- Demand remains under pressure. - Volumes in Hair, Oral and Skin care saw growth falling off to flat or into negative territory. - Juice consumption saw a sharp slowdown, but penetration is low and room for growth is huge.

- No indicators of a revival in demand are visible for near term - Liquidity pressure in channels continues - Co is working towards improving direct reach to reduce dependency on wholesale channel. Consolidation of distributors will enable them to take advantage of scale and offer more discounts - Rural is outpacing urban mkt by 400bps

Revenues Healthcare - Gained back entire mkt sh loss to

Patanjali in Honey - Seeing some pressure from smaller players like Apis and Hitkari - Taking steps through sales promotion to counter that

- Showed strong performance led by new variants, distribution expansion and focused marketing - Investments will be restricted to Pudin Hara, Honitus and Lal Tail which have performed exceedingly well

- Overall business stayed resilient, Glucose and Chyawanprash saw robust growth - Reliance on wholesale continues, but efforts under way to expand direct reach

- Focus on power brands has helped drive growth - Co saw mkt share gain across categories like Chywanprash, Digestive and Glucose - Lower competitive intensity allowed the co to take marginal price hikes - Total ayurvedic market Rs 30-40bn. Dabur is very low in terms of mkt share. Branded ethical market share is 20-25%, but some regional players have higher market share. RTM so far for ayurvedic has been ayurvedic outlets. Now co is tying up with doctors and regular chemists to drive growth in ayurvedic

HPC - Co made mkt sh gains in shampoos - Red Franchise continued to perform well, but Babool remained under pressure - Odonil and Sanifresh drove HC's performance, delivering strong results - However, Co saw a decline in mkt sh in HC

- Vertical posted a strong growth - The co was able to gain mkt sh in the hair oils segment - Oral care performed very well and gained mkt sh due to increased penetration and aggressive marketing

- Dabur grew ahead of the categories in HPC and gained mkt sh across all segments

- Oral care growth was seen across brands. Downtrading was witnessed within low cost toothpaste units but not between brands - Meswak returned to a growth trajectory - Dabur is working on reimaging Babool as ayurvedic rather than a low price brand - Restarted investment in tooth powder, wants to take share from leader (Rs 5bn category) - Dabur Amla Hair oil mkt share grew 50bps. 80% of Dabur's hair oil portfolio is perfume oil. Co has lost mkt share to low price players in some segments over the few years. Presence in coconut oil is low and co could gain mkt share - Shampoo saw 60bps mkt share gain to 5.6% - Odomos gained 250bps in mkt share


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4QFY19 1QFY20 2QFY20 3QFY20 Foods - Despite the segment witnessing weak

performance, Real Juice continued to gain mkt sh

- Launched Juice alternatives with reduced sugar content - Also launched Real Koolerz Mango at the Rs 10 price point

- Focusing on launching differentiated products in J&N with low or no sugar. Saw significant gain in mkt sh - Have entered drinks segment and launched PET bottle at Rs 10 price point

- Beverages impacted by downtrading in the category (juices to low priced aerated drinks and dairy beverage) - Introduced Real Aloe Vera Juice (@Rs 110) in the premium segment - Real gained 530 bps in mkt share to 62.4% - Co is entering PET bottles to spur out-of-home consumption - Honey marginally declined. Smaller players have been chipping away at the mkt share

Margins Gross Margins - Inflation in RM has been benign and

has been set off by price hikes - Volume growth is compensating for reduction in absolute gross margins due to aggressive promotions - Don’t expect inflationary pressure going forward

- Benign raw material and commodity prices provided support to margins

- Agri inflation was high but crude based derivatives saw deflation. It leads to GM expansion besides favourable base

Profitability - Growth was lower than prev Q due to prolonged winter - Don’t intend to take margins forward. Looking to keep it stable. Growth will come from premiumisation

- International business showed signs of recovery with encouraging constant currency growth. Should see minor improvement over the next year - Overall operating margin saw an improvement, increasing by 157bps

- VCTS in Nepal and infiltration issues in Bangladesh negatively impacted constant currency growth. - Operating margin saw an improvement, partly on account IndAS 116 changes - Exceptional provision of Rs 400mn made for impairment of investments

- EBITDA margin in the International business grew 100bps - Cost operating initiatives by the co helped improve EBITDA margins - Co is looking to maintain margins. Savings or margin expansion will be reinvested behind brands


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Quarterly Financials Year to March (Rs mn) Q3FY20 Q3FY19 YoY (%) Q2FY20 QoQ (%) 9MFY20 9MFY19 YoY (%) Net Revenue 23,530 21,992 7.0 22,120 6.4 68,382 64,049 6.8 Material Expenses 11,745 11,153 5.3 10,885 7.9 34,106 32,397 5.3 Employee Expenses 2,448 2,376 3.0 2,415 1.3 7,177 6,960 3.1 Advertisement and Publicity 2,035 1,781 14.3 1,442 41.1 5,498 5,106 7.7 Other Operating Expenses 2,374 2,229 6.5 2,482 (4.4) 7,201 6,762 6.5 EBITDA 4,929 4,454 10.7 4,895 0.7 14,401 12,823 12.3 Depreciation 544 449 21.3 545 (0.1) 1,616 1,307 23.7 EBIT 4,385 4,005 9.5 4,351 0.8 12,785 11,517 11.0 Other Income 745 753 (1.0) 818 (9.0) 2,295 2,301 (0.3) Interest Cost 105 167 (37.3) 152 (31.2) 410 472 (13.1) PBT before exceptional 5,025 4,591 9.5 5,016 0.2 14,670 13,346 9.9 Exceptional (200) - na (400) na (800) - na PBT 4,823 4,596 5.0 4,618 4.4 13,874 13,356 3.9 Tax 835 924 (9.6) 582 43.5 2,211 2,608 (15.2) PAT before minority interest 3,989 3,672 8.6 4,036 (1.2) 11,663 10,748 8.5 Minority Interest 10.6 11.6 (8.6) 10.6 - 31.8 28.6 11.2 PAT 3,978 3,661 8.7 4,026 (1.2) 11,631 10,719 8.5 Adjustment 160 - na 320 na 644 - na APAT 4,138 3,661 13.0 4,346 (4.8) 12,276 10,719 14.5

Margin (% of sales) Q3FY20 Q3FY19 YoY (bps) Q2FY20 QoQ (bps) 9MFY20 9MFY19 YoY (bps) Material Expenses 49.9 50.7 (80) 49.2 70 49.9 50.6 (71) Employee Expenses 10.4 10.8 (40) 10.9 (52) 10.5 10.9 (37) ASP Expenses 8.6 8.1 55 6.5 213 8.0 8.0 7 Other Operating Expenses 10.1 10.1 (4) 11.2 (113) 10.5 10.6 (3) EBITDA 20.9 20.3 70 22.1 (118) 21.1 20.0 104 Tax Rate 17.3 20.1 (279) 12.6 471 15.9 19.5 (360) APAT Margin 17.6 16.6 94 19.6 (206) 18.0 16.7 122 Source: Company, HDFC sec Inst Research *like-like growth

Domestic business grew by 6% (exp. of 6%) driven by 6% volume growth International biz posted robust growth of 11.7% contributing to overall growth Consolidated GM expanded by 80bps owing to benign commodity inflation and richer mix Exceptional item of Rs 200mn was on account of provision for impairment in treasury investment (due to rating downgrade and default in repayment) Employee/A&P/Other expenses grew by 3/4/7%. EBITDAM expanded by 70bps to 20.9% (in-line).


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Quarterly Segmental Year to March (Rsmn) Q3FY20 Q3FY19 YoY (%) Q2FY20 QoQ (%) 9MFY20 9MFY19 YoY (%) Segmental Revenues Consumer Care Business 20,614 19,116 7.8 18,847 9.4 57,906 53,443 8.4 Foods 2,289 2,266 1.0 2,671 (14.3) 8,623 8,795 (2.0) Retails 346 342 1.1 292 18.6 962 929 3.5 Others 217 214 1.2 246 (11.8) 699 679 3.0 Unallocated other operating revenue 64 54 18.7 64 0.2 192 202 (5.1) Total 23,529 21,992 7.0 22,120 6.4 68,382 64,049 6.8 Segmental EBIT Consumer Care Business 5,001 4,647 7.6 5,008 (0.1) 14,345 12,962 10.7 Foods 253 296 (14.7) 366 (30.9) 1,163 1,301 (10.6) Retails (2) 13 (111.3) (2) (6.3) 4 32 (89.1) Others 18 17 3.5 17 6.0 51 60 (13.6) Total 5,270 4,973 6.0 5,389 (2.2) 15,562 14,354 8.4 Less: (a) Interest Cost & Bank Charges 105 167 (37.3) 152 (31.2) 410 472 (13.1) (b) Other Un-allocable Expenses 140 216 (35.1) 220 (36.5) 482 537 (10.1) PBT 5,025 4,591 9.5 5,016 0.2 14,670 13,346 9.9 Capital Employed Consumer Care Business 25,737 23,190 11.0 25,761 (0.1) 25,737 23,190 11.0 Foods 4,725 3,488 35.5 4,411 7.1 4,725 3,488 35.5 Retails 259 308 (16.0) 282 (8.1) 259 308 (16.0) Others 355 342 3.9 280 26.7 355 342 3.9 Total 31,076 27,327 13.7 30,733 1.1 31,076 27,327 13.7 Unallocable Capital Employed 32,038 25,399 26.1 31,120 3.0 32,038 25,399 26.1 Total Capital Employed 63,114 52,727 19.7 61,853 2.0 63,114 52,727 19.7 Source: Company, HDFC sec Inst Research EBIT Margin Year to March (Rsmn) Q3FY20 Q3FY19 YoY (bps) Q2FY20 QoQ (bps) 9MFY20 9MFY19 YoY (bps) Consumer Care Business 24.3 24.3 (5) 26.6 (231) 24.8 24.3 52 Foods 11.0 13.1 (203) 13.7 (265) 13.5 14.8 (131) Retails (0.4) 3.9 (432) (0.5) 11 0.4 3.4 (308) Others 8.2 8.0 18 6.8 137 7.4 8.8 (141) Total 22.4 22.6 (22) 24.4 (197) 22.8 22.4 35 Source: Company, HDFC sec Inst Research

Consumer care business contributed to Dabur’s overall growth but Foods continued to be a drag EBIT margins contracted across the board owing to higher investment behind brands by the co


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Revenue Contribution (3QFY20) Revenue Contribution (FY19)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research Revenue growth Domestic Value and Volume Growth Trajectory



Domestic70.2

International27.4

Others2.3

(%)

International performance has recovered from the pain in FY18. Co remains committed to deliver mid-high single digit growth Dabur has outperformed the industry with overall volume growth and a moderated base will see further growth in upcoming quarters

Domestic71.1

International26.1

Others2.8

(%)

1 2

(7)

1

(5)

11

18

10

24

9

15

6 11

5 6 6

0(6)

(20) (15)(11)

(6)

11 12 9

3 2 6

2

12

(20)

(8)

4

16

28

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

1QFY

20

2QFY

20

3QFY

20

Domestic International(%)

1 2

(7)

1

(5)

10

18

10

24

9

15

6

11

5 64 5

(5)

2

(4)

7

13

8

21

812

4

10

57

-10.0

-1.0

8.0

17.0

26.0

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

194Q

FY19

1QFY

202Q

FY20

3QFY

20

Value growth Volume growth (%)


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Domestic Revenue Mix (FY18) Domestic Revenue Mix (FY19)

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

Dabur’s oral portfolio continues to gain scale aided by the return to growth in Meswak and Babool Health supplements growth has recovered owing to decline in competitive intensity from Patanjali

Hair Care21

Health Supplement

17

Foods18

Oral Care17

OTC & Ethicals

9

Home Care7

Skin Care5

Digestives6

(%)

Hair Care22

Health Supplement

19

Foods16

Oral Care16

OTC & Ethicals

9

Home Care7

Skin Care5

Digestives6 (%)


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Domestic Category Growth (YoY)

Categories YoY Growth Wt. Avg.

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 FY17 FY18 FY19 Hair Care -11% 2% 17% 9% 19% 11% 24% 3% 12% 3% 1% -6% 4% 14% Oral Care 2% 23% 23% 11% 17% 4% 10% 8% 11% 4% 9% 4% 15% 10% Foods -8% 12% 0% 2% 27% 2% 12% -7% 2% -5% -2% 18% 1% 8% Health Supplements -7% 3% 20% 14% 28% 12% 14% 10% 20% 14% 12% -5% 10% 16% Home Care 6% 10% 36% 0% 17% 11% 9% 16% 11% 7% 3% 6% 14% 13% OTC & Ethicals -7% 6% 9% 9% 13% 10% 18% 15% 14% 4% 4% -8% 5% 14% Digestives 4% 12% 19% 7% 22% 11% 23% 12% 18% 10% 16% -8% 10% 17% Skin Care 4% 16% 15% 9% 27% 12% 19% 11% 12% 1% 0% -2% 11% 17% Source: Company, HDFC sec Inst Research

Health supplements and Digestives has driven overall growth in 3QFY20 Continued market share gains in Toothpaste is heartening Juice portfolio is the key pain point for Dabur Hair oil category growth has moderated amidst weak consumer sentiments. Dabur continues to gain market share


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Assumptions Particulars FY18 FY19 FY20E FY21E FY22E Domestic Gr. (%) 5.2 11.2 6.6 11.4 12.6 Hair Care Gr. (%) 4.2 13.8 5.7 9.5 9.0 Oral Care Gr. (%) 16.9 9.7 (0.1) 11.3 12.0 Health Supplements Gr. (%) 10.3 14.8 12.9 14.0 15.0 OTC & Ethicals Gr. (%) 5.2 14.1 6.7 14.7 15.5 Digestive Gr. (%) 10.4 16.6 11.2 14.2 15.5 Home Care Gr. (%) 14.2 13.0 6.7 14.3 15.0 Skin Care Gr. (%) 11.1 17.4 1.6 14.9 15.0 Foods Gr. (%) 1.5 9.4 (5.9) 9.3 10.0 International Gr. (%) (6.3) 6.6 5.4 12.0 11.0 Consolidated Revenue Gr. (%) 6.9 10.5 7.2 11.7 12.2 Gross Margin (%) 50.5 49.5 50.3 51.1 51.3 ASP (% of sales) 7.9 7.1 7.3 7.2 7.1 Distribution (% of sales) 2.5 2.6 2.6 2.6 2.6 Employee (% of sales) 10.3 11.0 10.6 10.4 10.1 Other Expenses (% of sales) 9.0 8.4 8.8 8.3 8.1 EBITDA Margin (%) 20.9 20.4 21.0 22.5 23.4 Tax Rate (%) 19.8 16.2 18.0 18.0 20.0 Source: HDFC sec Inst Research Change in Estimate

FY20E FY21E FY22E

New Old Change New Old Change New Old Change Net Revenue 91,456 91,871 -0.5% 102,175 103,014 -0.8% 114,672 115,900 -1.1% EBITDA 19,619 19,930 -1.6% 23,038 23,311 -1.2% 26,871 27,142 -1.0% EBITDA (adj) 19,239 19,550 -1.6% 23,038 23,311 -1.2% 26,871 27,142 -1.0% APAT 15,756 16,176 -2.6% 20,032 20,174 -0.7% 23,175 23,433 -1.1% EPS 8.9 9.2 -2.6% 11.3 11.4 -0.7% 13.1 13.3 -1.1% Source: HDFC sec Inst Research


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Peer Set Comparison

Company MCap

(Rs bn)

CMP (Rs) Reco. TP

(Rs)

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

FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E

HUL 4,391 2,058 NEU 2,021 33.8 41.3 46.1 60.9 49.8 44.6 42.2 34.9 31.1 37.5 27.5 31.6 ITC 2,607 234 BUY 366 12.9 13.8 15.2 18.2 16.9 15.4 12.8 11.5 10.1 46.1 48.6 51.5 Nestle 1,487 15,548 NR 13,842 233.3 277.4 317.7 66.6 56.1 48.9 46.0 39.4 34.2 112.2 128.8 162.2 Dabur 846 479 BUY 510 8.9 11.4 13.3 53.5 41.9 36.0 41.5 34.8 29.5 52.6 60.1 66.7 Britannia 771 3,211 BUY 3,678 58.9 70.8 85.4 54.5 45.3 37.6 39.8 32.8 27.2 42.7 48.7 55.3 Marico 436 338 NEU 373 8.2 9.6 11.2 41.4 35.2 30.1 29.3 25.7 22.7 44.4 49.8 55.2 United Spirits 461 635 BUY 759 12.3 16.1 19.2 51.4 39.5 33.1 29.8 25.3 21.6 18.3 21.7 23.8 Colgate 380 1,396 NEU 1,392 30.4 35.5 41.3 45.9 39.3 33.8 29.2 25.5 22.3 70.8 81.0 94.9 Jubilant Food 242 1,832 BUY 2,178 31.6 40.0 49.8 58.1 45.8 36.8 35.8 28.3 22.9 33.5 24.2 31.7 Emami 140 300 BUY 463 12.5 14.1 15.9 23.9 21.4 18.9 17.3 15.5 13.7 25.6 30.6 38.0 Radico Khaitan 53 400 BUY 527 16.4 21.4 24.8 24.3 18.7 16.1 14.7 11.9 10.2 15.1 15.5 16.7 Source: HDFC sec Inst Research


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Income Statement (Rs mn) FY18 FY19 FY20E FY21E FY22E Net Revenues 77,219 85,331 91,456 102,175 114,672 Growth (%) 6.9 10.5 7.2 11.7 12.2 Material Expenses 38,199 43,090 45,459 50,004 55,862 Employee Expense 7,928 9,379 9,668 10,609 11,564 A&P Expense 6,067 6,083 6,671 7,375 8,113 Distribution Expense 1,914 2,201 2,359 2,635 2,957 Other Expenses 6,936 7,182 7,680 8,513 9,306 EBITDA 16,174 17,396 19,619 23,038 26,871 EBITDA Growth (%) 7.2 7.6 12.8 17.4 16.6 EBITDA Margin (%) 20.9 20.4 21.5 22.5 23.4 Adj EBITDA 16,174 17,396 19,239 23,038 26,871 Adj EBITDA Growth (%) 7.2 7.6 10.6 19.7 16.6 Adj EBITDA Margin (%) 20.9 20.4 21.0 22.5 23.4 Depreciation 1,622 1,769 2,261 2,412 2,562 EBIT 14,552 15,627 17,358 20,626 24,309 Other Income (Including EO Items) 3,052 2,962 3,287 4,187 4,979

Interest 531 596 583 332 266 PBT 16,928 17,239 19,262 24,481 29,022 Total Tax 3,354 2,786 3,468 4,407 5,804 Adjusted PAT 13,663 14,436 15,756 20,032 23,175 APAT Growth (%) 7.0 5.7 9.1 27.1 15.7 Adjusted EPS (Rs) 7.8 8.2 8.9 11.3 13.1 EPS Growth (%) 7.0 5.7 8.8 27.1 15.7


Balance Sheet (Rs mn) FY18 FY19 FY20E FY21E FY22E SOURCES OF FUNDS Share Capital - Equity 1,762 1,762 1,767 1,767 1,767 Reserves 55,304 56,467 63,729 73,111 81,374 Total Shareholders Funds 57,065 58,229 65,496 74,878 83,141 Minority Interest 265 314 276 233 191 Long Term Debt 3,686 306 206 106 6 Short Term Debt 5,766 5,266 4,466 2,966 1,466 Total Debt 9,452 5,572 4,672 3,072 1,472 Net Deferred Taxes 1,091 1,091 1,091 1,091 1,091 Other Non-current Liabilities &Provns 565 595 655 720 792

TOTAL SOURCES OF FUNDS 68,438 65,801 72,189 79,994 86,687 APPLICATION OF FUNDS Net Block 20,281 20,219 20,957 21,046 20,983 CWIP 522 756 767 780 795 Other Non Current Assets 490 954 1,049 1,154 1,270 Total Non-current Assets 21,293 21,929 22,774 22,980 23,048 Inventories 12,562 13,005 13,700 15,048 16,728 Debtors 7,061 8,336 8,934 9,981 11,202 Other Current Assets 4,988 6,122 6,549 7,009 7,503 Cash & Equivalents 41,112 38,029 42,881 49,603 55,079 Total Current Assets 65,723 65,492 72,064 81,641 90,512 Creditors 17,094 19,811 20,732 22,602 24,739 Other Current Liabilities & Provns 1,484 1,809 1,917 2,026 2,134 Total Current Liabilities 18,578 21,620 22,649 24,628 26,873 Net Current Assets 47,145 43,872 49,415 57,013 63,639 TOTAL APPLICATION OF FUNDS 68,438 65,801 72,189 79,994 86,687



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Cash Flow Statement (Rsmn) FY18 FY19 FY20E FY21E FY22E Reported PBT 16,931 17,239 19,262 24,481 29,022 Non-operating & EO Items (2,262) 49 (38) (42) (42) Interest Expenses 424 596 583 332 266 Depreciation 1,622 1,769 2,261 2,412 2,562 Working Capital Change (2,575) (255) (739) (929) (1,207) Tax Paid (3,249) (2,786) (3,468) (4,407) (5,804) OPERATING CASH FLOW ( a ) 10,890 16,611 17,862 21,848 24,797 Capex (2,003) (1,929) (3,000) (2,500) (2,500) Free Cash Flow (FCF) 8,887 14,682 14,862 19,348 22,297 Investments (5,837) 4,464 (2,500) (2,500) (2,500) Non-operating Income 2,437 - - - - INVESTING CASH FLOW ( b ) (5,402) 2,535 (5,500) (5,000) (5,000) Debt Issuance/(Repaid) (545) (3,880) (900) (1,600) (1,600) Interest Expenses (428) (596) (583) (332) (266) FCFE 6,461 23,622 13,845 18,780 21,663 Share Capital Issuance - 0 6 (0) 0 Dividend (4,770) (13,273) (8,494) (10,651) (14,912) Others - - - - - FINANCING CASH FLOW ( c ) (5,744) (17,748) (9,972) (12,583) (16,778) NET CASH FLOW (a+b+c) (256) 1,398 2,390 4,264 3,019 EO Items, Others 269 (17) - - - Closing Cash & Equivalents 3,061 4,442 6,793 11,015 13,992


Key Ratios FY18 FY19 FY20E FY21E FY22E PROFITABILITY (%) GPM 50.5 49.5 50.3 51.1 51.3 EBITDA Margin 20.9 20.4 21.5 22.5 23.4 EBIT Margin 18.8 18.3 19.0 20.2 21.2 APAT Margin 17.7 16.9 17.2 19.6 20.2 RoE 25.9 25.0 25.5 28.5 29.3 RoIC (or Core RoCE) 47.3 50.1 52.4 59.3 65.5 RoCE 22.4 22.7 24.0 27.2 28.5 EFFICIENCY Tax Rate (%) 19.8 16.2 18.0 18.0 20.0 Fixed Asset Turnover (x) 2.5 2.7 2.6 2.7 2.9 Inventory (days) 59.4 55.6 54.7 53.8 53.2 Debtors (days) 33.4 35.7 35.7 35.7 35.7 Other Current Assets (days) 23.6 26.2 26.1 25.0 23.9 Payables (days) 80.8 84.7 82.7 80.7 78.7 Other Current Liab&Provns (days) 7.0 7.7 7.7 7.2 6.8 Cash Conversion Cycle (days) 28.5 25.0 26.1 26.5 27.2 Net D/E (x) (0.6) (0.6) (0.6) (0.6) (0.6) Interest Coverage (x) 27.4 26.2 29.8 62.1 91.3 PER SHARE DATA (Rs) EPS 7.8 8.2 8.9 11.3 13.1 CEPS 8.7 9.2 10.2 12.7 14.6 Dividend 6.3 4.0 5.0 7.0 9.0 Book Value 32.4 33.1 37.1 42.4 47.1 VALUATION P/E (x) 61.7 58.4 53.7 42.2 36.5 P/BV (x) 14.8 14.5 12.9 11.3 10.2 EV/EBITDA (x) 50.6 47.0 41.7 35.2 30.0 EV/Revenues (x) 10.6 9.6 9.0 8.0 7.1 OCF/EV (%) 1.3 2.0 2.2 2.7 3.1 FCF/EV (%) 1.1 1.8 1.8 2.4 2.8 FCFE/Mkt Cap (%) 0.8 2.8 1.6 2.2 2.6 Dividend Yield (%) 1.3 0.8 1.0 1.5 1.9



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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 9-Jan-19 416 BUY 477 2-Feb-19 452 BUY 482

10-Apr-19 404 BUY 485 3-May-19 382 BUY 464 9-Jul-19 406 BUY 457

22-Jul-19 420 BUY 470 11-Sep-19 444 BUY 491 22-Sep-19 446 BUY 497 11-Oct-19 439 BUY 490 5-Nov-19 481 BUY 511 30-Dec-19 460 BUY 512 9-Jan-20 461 BUY 512

31-Jan-20 479 BUY 510

350

370

390

410

430

450

470

490

510

530

550

Jan-

19

Feb-

19

Mar

-19

Apr-

19

May

-19

Jun-

19

Jul-1

9

Aug-

19

Sep-

19

Oct

-19

Nov-

19

Dec-

19

Jan-

20

Dabur TP

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel,Mumbai - 400 013 Board : +91-22-6171 7330 www.hdfcsec.com


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Disclosure: We, Naveen Trivedi, MBA & Aditya Sane, CA, 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. 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