Buy Dabur India
Published on Thursday, November 26th, 2009 at 12:52 PMAuthor: insightt95in (167 Articles)
Dabur India
Buy
Price: Rs165 Target Price (Dec-10): Rs177
Focused efforts to stay on the growth path
Having all the while maintained that there is no evident slowdown in
consumption trends, Dabur India continues to remain confident of its
ability to sustain the strong growth momentum going forward (c.19-
20%). This is despite having a fairly strong base to contend with
(20% sales growth in 2HF09 vs 17% in 1H). Our recent management
interaction seems to suggest that the final verdict on monsoon-led
weakness appears to be out: consumption remains reasonably strong
as delayed revival of rains helped cap the damage to one crop-cycle
only. Also, personal care is likely to escape the downtrading
phenomenon witnessed in laundry due to higher brand-stickiness in
the category. Meanwhile, Dabur’s volume growth profile (10%-region
over past several quarters) helps provide a distinct source of comfort.
* Focused efforts to stay on the growth path: Dabur continues to stay
focused on its high growth categories, viz. hair care, baby & skin care and
foods. While new launches & re-launches provide significant impetus to
urban growth, it continues to invest for rural consumers through focused
marketing efforts & introduction of more low-unit packs at attractive pricepoints
across its portfolio of products to increase rural penetration.
?? Skin care a key focus area: Skin care remains a key focus area within
the overall thrust in personal and health care segments. As per
management, skin care offers a more attractive market opportunity vis-àvis
foods & beverages and home care. Important drivers in this aspect are
the Fem Care acquisition (largely integrated with the company by now)
and recent new launches in this space. Recent launches include: (a) new
skin care brand U-veda with product offerings like fairness cream, face
wash, moisturizer etc, (b) herbal bleach under the Fem brand. Dabur
currently derives c.3-4% of its domestic sales from new launches.
* Fem care integration: Fem-care distribution network integration
underway with small towns & modern trade channels being merged with
Dabur’s larger CCD network. We expect the integration to yield synergy
benefits for the company, as witnessed for Foods. Fem will also be merged
into the main company with retrospective effect from Apr-09. In its first
full quarter of consolidation with Dabur India, Fem is estimated to have
contributed c.50bps to the combined entity’s gross margin on account of a
higher inherent margin profile of the Fem products. This, in our view,
augurs well for the longer term.
* Other key takeaways:
On the fiscal side, Dabur has been investing in new plants to take
advantage of duty & tax breaks; two new facilities are expected to get
operational by Mar-10 which will allow the company to enjoy tax
breaks for 10 years thereon. It is widely expected that GST (Goods &
Services Tax), when implemented, will not disadvantage the company
in terms of the exemption enjoyed by it in its current & upcoming
excise-free facilities.
Note: More intra-day opportunities will be provided
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