Dabur | 2QFY2012 Result Update

October 31, 2011

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

ACCUMULATE
CMP Target Price
2QFY11 973 203 20.9 160 % yoy 29.8 16.5 (213.4) 8.4 Angel Est 1,202 224 18.6 173 % Diff 5.1 5.8 13 0.4

`101 `115
12 Months

2QFY12 1,262 237 18.7 174

Investment Period
Stock Info Sector Market Cap (`cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

FMCG 17,581 0.3 87 / 122 180,349 1 17,705 5,327 DABU.BO DABUR@IN

Dabur reported an impressive performance for 2QFY2012. Top-line growth was strong at 30% yoy, marginally above our estimates, driven by a mix of volume and value growth and recent acquisitions. Earnings grew by 8.4% yoy, in-line with our estimates. We maintain our Accumulate recommendation on the stock.

Key highlights for the quarter: During the quarter, Dabur merged its consumer healthcare division with the consumer care division to synergize distribution. Dabur Lanka Pvt. Ltd., the wholly owned subsidiary of Dabur International Ltd., was incorporated for setting up the new fruit juice facility near Colombo (the company has plans to invest `70cr over two years). In terms of organic growth, the domestic business grew by 11% yoy and the international business excluding the recent acquisitions grew by 22.8% yoy.
Outlook and valuation: Post 2QFY2012 results, we maintain our revenue and earnings estimates. We expect the company to grow at a ~20% CAGR over FY201113E, backed by its recent acquisitions. We have modeled in flat OPM for FY2012E and FY2013E due to sustained gross margin pressure and upon higher ad spends because of a stronger competitive environment. At the CMP, the stock is trading at 22x FY2013E EPS. We maintain our Accumulate rating on the stock with a target price of `115.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 68.7 6.1 19.5 5.7

Abs.(%) Sensex Dabur

3m (3.1)

1yr

3yr 80.9

(2.7) (11.6)

1.4 151.3

Key financials
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

FY2010 3,390 20.9 500.5 28.1 18.6 2.9 35.1 9.4 57.1 52.3 5.2 27.9

FY2011 4,077 20.3 568.9 13.7 18.5 3.3 30.9 12.6 48.9 37.5 4.5 24.3

FY2012E 5,179 27.0 701.2 23.3 18.4 4.0 25.1 10.1 44.9 32.4 3.5 18.9

FY2013E 5,919 14.3 803.0 14.5 18.4 4.6 21.9 8.3 41.6 32.6 3.0 16.4

Sreekanth P.V.S
022 3935 7800 Ext: 6841

sreekanth.s@angelbroking.com

Please refer to important disclosures at the end of this report

Dabur | 2QFY2011 Result Update

Exhibit 1: Quarterly performance

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 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 (`) 2QFY12 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 2QFY11 973 458 47.1 78 8.0 122 12.5 112 11.5 770 203 20.9 5 19 16 196 196 20.1 36 18.2 160 0.1 160 16.5 174 0.9 8.4 8.4 8.4 20.0 10.5 274.7 14.6 14.7 10.5 33.3 16.5 47.8 5.1 30.3 % chg 29.8 37.7 1HFY2011 2,467 1,260 51.1 197 8.0 279 11.3 324 13.1 2,060 407 16.5 30 43 42 377 377 15.3 75 19.9 302 0.3 302 12.2 174 1.7 1HFY2012 1,889 893 47.3 151 8.0 272 14.4 234 12.4 1,549 340 18.0 8 33 31 330 330 17.4 62 18.8 268 (0.6) 268 14.2 174 1.5 12.4 12.4 12.8 21.1 14.4 265.6 28.0 34.3 14.4 32.9 19.9 38.6 2.6 30.5 % chg 30.6 41.1

Source: Company, Angel Research

Low volume growth in domestic business, IBD grows strongly

Dabur posted strong top-line growth of 30% yoy to `1,262cr (`973cr) on a consolidated basis, led by volume growth of 10% yoy. International business, in constant currency terms, grew by 26% yoy and reported 22.8% yoy growth on an organic basis. The overall international business grew by 102.2% yoy on account of the companys recent acquisitions. The company merged its consumer healthcare division (CHD) with consumer care division (CCD) to synergize the distribution. In terms of categories, CCD recorded its highest-ever growth of 29% yoy, led by volume and price hikes, with foods, home care and oral care doing well. IBD contributed 32% to the companys total revenue during 2QFY2012.

October 31, 2011

Dabur | 2QFY2011 Result Update

Exhibit 2: Acquisitions led to top-line growth

1,400 1,200 1,000 35.0 30.0 25.0

Exhibit 3: Modest volume growth in 2QFY2012

25.0 20.0 19.5 14.2 11.0 13.3 14.0 10.0 12.7 8.6 10.0

(yoy %)

(`cr)

600 400 200 -

15.0 10.0 5.0 -

(%)

800

20.0

15.0 10.0 5.0 -

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12
14.2

Top-line (LHS)

yoygrowth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Earnings growth at 8.4% yoy

Daburs reported earnings for the quarter on a consolidated basis registered modest growth of 8.4% yoy to `174cr (`160cr), in-line with our estimates.

Gross margin remains under pressure, drags OPM

On the operating front, Dabur delivered a margin contraction of 213bp yoy to 18.7% (20.9%) due to a 287bp contraction in gross margin. However, lower ad spends (down 237bp yoy) and staff costs during the quarter curtailed the further decline in OPM.

Exhibit 4: Earnings growth moderates

210 160 35.0 30.0 25.0 20.0 15.0 10.0 5.0 -

Exhibit 5: OPM contracts by 213 bp as ad spends rise

60.0 50.0 40.0 30.0 55.0 54.4 54.7 50.0 52.9 51.6 55.9 47.8 50.0

(`cr)

(yoy %)

110 60 10

(%)

20.0 10.0 -

20.7 19.0 19.1 18.7 20.9 19.3 18.6 14.2 14.6 13.6

10.1 12.5 12.5 11.5 12.6 10.1

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12
A&P Spends

PAT (LHS)

yoy growth (RHS)

OPM

Gross margin

Source: Company, Angel Research

Source: Company, Angel Research

October 31, 2011

2Q12

2Q12
18.7

Dabur | 2QFY2011 Result Update

Exhibit 6: 2QFY2012 Category-wise growth (Consolidated)

Growth (%) Consumer Care Division 29.0 Comments Growth was driven by volume and price hikes. Hair oils grew by robust 26.6% in 2QFY2012, driven by price hikes and volume growth, with both Dabur Amla hair oil and Vatika performing well. Also, Amla coconut hair oil performed well and gained market share. Shampoos continued to decline (down by 25.4% in 2QFY2012) due to high competition. Toothpastes grew by 7.8%. Growth in toothpastes was impacted by supply-side constraints in red toothpaste. Toothpowder grew by 1.7%. Health Supplements 7.8 Dabur Honey and Chywanprash contributed to the category growth. (Dabur Honey performed well.)

Hair Care

15.9

Oral Care

6.0

Digestives growth remained flat during the quarter

Digestives -

Lal Tail performed well, Hajmola mint masti candy performed well Hajmola tablets remained flat during the quarter
Sales were impacted by distribution re-alignment.

Skin care

Fem bleach reported flat sales due to the same reason. The company expanded Uveda portfolio by launching anti-aging cream and face scrub Odonil dragged the categorys growth. However, Odonil witnessed healthy growth in all formats across regions. Sanifresh performed well. Growth was witnessed across all brands.

Home Care

0.5

Foods Division

27.5 Activ fibre juices were launched and more variants in Real and Activ are in the pipeline. Organic growth came in at 22.8%. Constant currency growth stood at 26%.

International Business Division

102.2

Nigeria, Egypt and GCC grew well. Hobi Group recorded `31.4cr sales and Namaste Group reported sales of `131cr

Source: Company, Angel Research

October 31, 2011

Dabur | 2QFY2011 Result Update

Exhibit 7: Segment-wise performance (Consolidated)

Y/E Mar (` cr) Total Gross Sales Consumer Care Foods Business Retail Others Total PBIT Consumer Care Foods Business Retail Others PBIT Margin (%) Consumer Care Foods Business Retail Others 2QFY12 1,270 1,072 150 9 38 281 247 33 (3) 3 22.1 23.1 22.2 0.0 7.3 2QFY11 980 831 124 5 20 257 230 27 (3) 2 26.2 27.7 21.9 0.0 11.0 % chg 29.5 29.0 20.5 97.5 90.0 9.3 7.5 22.4 1HFY2012 2,486 2,099 307 18 62 514 458 58 (5) 3 20.7 21.8 18.9 0.0 5.1 1HFY2011 1,904.8 1,604.8 256.1 8.0 36.0 456.0 408.3 50.3 (4.9) 2.3 23.9 25.4 19.6 0.0 6.3 41.8 72.6 12.7 12.2 15.5 % chg 30.5 30.8 19.7

Source: Company, Angel Research

October 31, 2011

Dabur | 2QFY2011 Result Update

Investment rationale
Niche positioning and acquisitions to drive growth: Daburs niche positioning based on its ayurvedic/herbal 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 20% CAGR in revenue over FY201113E, with health supplements, baby care, home care and foods leading growth. Margin to remain under pressure: We expect Dabur to remain under margin pressure due to increased raw-material prices. Also, due to new product launches, various marketing initiatives and increased competition, the companys ad spends could witness a spike. We have modeled in OPM of ~18% for FY2012E and FY2013E. Acquisition rationale: The current acquisition provides Dabur entry into an attractive new market. Management has stated that integration of Hobi Group and Namaste Group is on track and the company plans to introduce its core products in international markets.

Outlook and valuation

Post 2QFY2012 results, we maintain our revenue and earnings estimates. We expect the company to grow at a ~20% CAGR over FY201113E, backed by its recent acquisitions. We have modeled in flat OPM for FY2012E and FY2013E due to sustained gross margin pressure and higher ad spends because of a stronger competitive environment. At the CMP, the stock is trading at 22x FY2013E EPS, we maintain our Accumulate view on the stock with a target price of `115.

October 31, 2011

Dabur | 2QFY2011 Result Update

Exhibit 8: Peer valuation

Company Asian Paints Britannia Colgate Dabur GSKCHL GCPL HUL ITC Marico Nestle Reco
Neutral Accumulate Neutral Accumulate Neutral Neutral Neutral Neutral Neutral Neutral

Mcap (` cr)
30,226 5,608 13,636 17,581 9,955 14,187 81,868 164,938 9,483 40,982

CMP (`)
3,151 469 1,003 101 2,367 438 375 213 154 4,250

TP (`)
495 115 -

Upside (%)
5 14 -

P/E (x) FY11E FY12E

30.7 30.5 31.1 25.1 28.6 26.5 32.1 28.6 30.5 42.1 25.0 20.9 26.6 21.9 24.1 20.4 28.2 24.1 24.5 35.4

EV/Sales (x) FY11E FY12E

3.2 1.1 5.1 3.5 3.3 3.5 3.6 6.4 2.8 5.6 2.7 0.9 4.4 3.0 2.8 2.8 3.1 5.3 2.4 4.8

RoE (%) FY11E FY12E

39.6 37.8 111.7 44.9 32.6 36.6 87.5 32.7 30.4 91.1 38.3 46.0 108.0 41.6 31.8 29.4 85.3 31.5 28.6 72.9

CAGR # Sales PAT

17.3 17.3 14.9 20.5 17.3 22.9 12.7 17.6 15.7 16.1 19.8 36.0 12.9 18.8 17.5 20.2 17.1 17.4 27.6 18.9

Source: Company, Angel Research

Exhibit 9: Angel v/s Consensus estimates

Top-line (` cr) Angel estimates Consensus Diff (%)
Source: Company, Angel Research

FY2011E

FY2012E

EPS (`) Angel estimates Consensus Diff (%)

FY2011E

FY2012E

5,179 5,146 0.7

5,919 5,958 (0.6)

4.0 3.8 6.0

4.6 4.6 0.2

Exhibit 10: Absolute returns of Dabur vs. Sensex

130% 120% 110% 100% 90% 80% 70% 60%
Dec-10 Mar-11 Aug-11 Apr-11 Jul-11 Nov-10 Feb-11 May-11 Sep-11 Oct-11 Jan-11 Jun-11

Exhibit 11: One-yr forward P/E Band

140 120 100 80 60 40 20 Dec-05 Dec-07 Dec-09 Apr-05 Apr-07 Apr-09 Aug-06 Aug-08 Aug-10
30x

Share Price (`)

Sensex

Dabur

15x

20x

25x

Source: Company, Angel Research

Source: Company, Angel Research

October 31, 2011

Apr-11

Dabur | 2QFY2011 Result Update

Exhibit 12: One-yr forward P/E chart

35.0 30.0 25.0 20.0 15.0 10.0 5.0 -

Exhibit 13: One-yr forward Prem vs. Sensex chart

120% 100% 80% 60% 40% 20% 0% -20%

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Oct-11

Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Dec-06

Dec-07

Dec-08

Dec-09

Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

Dec-10

Source: Company, Angel Research

Source: Company, Angel Research

October 31, 2011

Aug-11

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Dabur | 2QFY2011 Result Update

Profit & Loss Statement (Consolidated)

Y/E March (` cr) Gross sales Less: Excise duty Net Sales Total operating income % chg Total Expenditure Cost of Materials Advertising Exp Personnel Others EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Prior Period & Extra Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of associate Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2009 FY2010 FY2011 FY2012E FY2013E 2,834 29 2,805 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 3,416 25 3,390 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 4,110 32 4,077 4,077 20.3 3,323 1,905 535 322 561 755 20.0 18.5 82 673 17.5 16.5 30 65 10.5 708 17.8 708 139 19.6 569 0.3 569 569 13.4 13.9 3.3 3.3 13.4 5,226 47 5,179 5,179 27.0 4,226 2,455 699 404 668 953 26.3 18.4 99 854 26.9 16.5 35 57 8.0 877 23.8 877 175 20.0 701 0.3 701 701 23.3 13.5 4.0 4.0 23.3 5,973 54 5,919 5,919 14.3 4,831 2,800 799 468 764 1,089 14.2 18.4 113 976 14.2 16.5 34 62 9.2 1,004 14.5 1,004 201 20.0 803 0.3 803 803 14.5 13.6 4.6 4.6 14.5

October 31, 2011

Dabur | 2QFY2011 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 Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments 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 43 427 1,853 272 516 1,064 1,458 395 101 2,465 2,354 534 1,820 59 377 2,234 594 518 1,122 1,694 540 12 2,808 2,691 647 2,044 67 377 2,609 735 592 1,283 1,937 672 12 3,172 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 1,560 1,734 4 1,051 19 2,808 174 1,954 2,128 4 1,021 19 3,172 FY2009 FY2010 FY2011 FY2012E FY2013E

October 31, 2011

10

Dabur | 2QFY2011 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 FY2009 FY2010 445 49 (95) 23 54 (29) 340 (129) (122) (251) 5 131 130 23 (17) 72 77 148 601 56 (48) 12 100 (11) 510 (134) (238) (14) (51) 151 12 (228) 44 148 192 FY2011 FY2012E FY2013E 708 82 (135) 10 139 20 546 (961) (1,124) 872 203 10 659 80 192 272 877 99 196 35 175 (56) 975 (436) 50.00 (386) 233 35 (268) 321 272 594 1,004 113 (46) 34 201 2 906 (345) (345) (30) 356 34 (420) 141 594 735

(104) (163.33)

October 31, 2011

11

Dabur | 2QFY2011 Result Update

Key Ratios
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 (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC (ex-cash) (days) 3.5 49 23 60 (0) 3.4 46 13 50 (1) 2.1 63 32 64 11 2.2 49 30 62 (4) 2.2 49 30 62 (4) 47.2 47.4 54.4 52.3 51.6 57.1 37.5 34.6 48.9 32.4 31.0 44.9 32.6 33.6 41.6 4.5 2.2 5.1 1.7 9.5 5.8 2.9 6.4 2.0 10.8 3.3 3.3 3.7 1.2 8.0 4.0 4.0 4.6 1.8 10.0 4.6 4.6 5.3 2.0 12.2 44.9 19.9 10.7 1.7 6.3 37.5 16.7 35.1 15.8 9.4 2.0 5.2 27.9 15.6 30.9 27.0 12.6 1.1 4.5 24.3 7.4 25.1 22.0 10.1 1.7 3.5 18.9 6.4 21.9 19.2 8.3 2.0 3.0 16.4 5.6 FY2009 FY2010 FY2011 FY2012E FY2013E

October 31, 2011

12

Dabur | 2QFY2011 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 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, 2011

13