DABUR Minor blip; innovation fuelled growth ahead

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1 RESULT UPDATE DABUR Minor blip; innovation fuelled growth ahead India Equity Research Consumer Goods Dabur India s (Dabur) Q1FY18 revenue, EBITDA and PAT (down 8.4%, 11.4% and 9.8% YoY, respectively) came in line with estimates. Strong volumes in April & May was off set by destocking in June, leading to domestic volumes dip of 4.4% YoY largely transitional. International business continued to remain soft (fourth quarter of QoQ dip) owing to unprecedented geo political conditions and macro economic pressures. EBITDA margin tumbled 142bps YoY, lower than peers, despite ad spends rising 11bps YoY. Dabur s expanding market share across key categories is positive. It is also likely beneficiary of increasing herbal trend and reducing competitive intensity. Maintain BUY. Minor blip in domestic operations; international operations tepid Dabur s Q1FY18, when seen in conjunction with Q3FY17 (demonetisation marred quarter), clearly reflects that end consumption has remained strong this time and negative performance only reflects disruptions in trade channel. While toothpaste, digestives, skin care and home care jumped 10.4%, 4.0%, 4.0% and 6.2% YoY, respectively, hair care, health supplements, OTC & ethical and food declined 11%, 7.0%, 6.6% and 8.3% YoY, respectively. Dabur continued to gain market share and is set to leverage its herbal heritage to position as Science based Ayurveda specialist. International business was impacted by macro economic slowdown and currency devaluation 2.2% YoY dip in CC (4.5% CC dip in Q4FY17). Q1FY18 conference call: Key takeaways The company maintained 5 10% FY18 volume growth guidance. For FY18, price hikes will be about 2 3% YoY. FY18 will also see strong innovations and launches. Inventory days have been compressed by 7 8 days, which now will be the new normal. Margins are likely be at same level as FY17. Outlook and valuations: Positive; maintain BUY We expect recovery in volumes and premiumisation on account of new launches and ayurvedic focus. Uptick in rural spending and government s stimulus remain key triggers. Backed by strong revival in volumes and improving market share, we revise target PE to 36x (earlier 34x), still at ~15% discount to peers, and arrive at revised TP of INR338 (INR327 earlier). Maintain BUY/SO. The stock is trading at 32.7x FY19E EPS. Financials (INR mn) Year to March Q1FY18 Q1FY17 % change Q4FY17 % change FY17 FY18E FY19E Net sales 17,845 19,477 (8.4) 19,090 (6.5) 76,801 83,005 94,185 EBITDA 2,944 3,488 (15.6) 4,176 (29.5) 15,089 15,789 18,886 Adjusted Profit 2,649 2,936 (9.8) 3,337 (20.6) 12,769 13,798 16,513 Adj Dil. EPS (INR) (9.8) 1.9 (20.6) Diluted P/E (x) EV/EBITDA (x) ROAE (%) Edelweiss Research is also available on Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. EDELWEISS 4D RATINGS Absolute Rating Rating Relative to Sector Risk Rating Relative to Sector Sector Relative to Market BUY Edelweiss Securities Limited Outperform Medium Underweight MARKET DATA (R: DABU.BO, B: DABUR IN) CMP : INR 307 Target Price : INR week range (INR) : 314 / 259 Share in issue (mn) : 1,761.5 M cap (INR bn/usd mn) : 541 / 8,513 Avg. Daily Vol.BSE/NSE( 000) : 1,634.7 SHARE HOLDING PATTERN (%) Current Q4FY17 Q3FY17 Promoters * MF's, FI's & BK s FII's Others * Promoters pledged shares (% of share in issue) PRICE PERFORMANCE (%) Stock Nifty : Nil EW FMCG Index 1 month (6.3) 3 months months Abneesh Roy abneesh.roy@edelweissfin.com Tanmay Sharma, CFA tanmay.sharma@edelweissfin.com Alok Shah alok.shah@edelweissfin.com August 4, 2017

2 Consumer Goods Table 1: Segment wise snapshot Segment Growth Y o Y(%) Domestic Vol. (4.4) Hair Care (11.0) Health supplement (7.0) Foods (8.3) Oral Care 1.5 Digestive 4.0 Skin Care 4.0 Home Care 6.2 OTC & Ethicals (6.6) International division (2.2) Key takeaways Q1FY18 Hair care category declined by 11% on account of massive de stocking in trade particularly in North & East Sarson Amla hair Oil, Brahmi Amla and Almond Hair Oil performed well in spite of uncertainty & down stocking Health Supplements category declined by 7% mainly due to Glucose which was impacted by a short summer & early rains. Market share in Dabur Honey stabilized with better pricing equation and quality focus Foods category was impacted by major de stocking and heightened discounting by competition Early rains in June impacted sales in North & Central India Beverages witnessed decline of 8.3% in primary sales however secondary growth was 4% Activ CoconutWater posted strong growth driven by consumer demand & new communication New flavours such as Real Mosambi and RealWellnezz performed well Entry into fruit drinks category off to a good start Toothpaste category posted growth of 10.4% YoY driven by all round good performance of portfolio Toothpowder declined and pulled down growth of oral care category to 1.5%. Newly launched Red Gel has performed well with good sales in spite of limited launch. National rollout underway Digestives posted growth of around 4% led by Hajmola & Pudin Hara which performed well Skin care recorded growth of 4% driven by double digit growth in Gulabari and good performance of Fem Bleaches Homecare category posted growth of 6.2% led by strong performance by Odomos Odonil Zipper Air Fresheners launched in Modern trade OTC and Ethicals contracted by 6.6% on account of trade de stocking Women s Healthcare brands Ashokarishta & Dashmularishta Asava posted double digit growth Dabur Woman Restorative Tonic rolled out nationally in medico marketing channel Honitus cough syrup performed well in spite of unfavorable market conditions Macro economic factors have impacted International Business sales across the MENA region due to: (i) Continued economic challenges in the region on account of falling oilprices; (ii) Currency devaluation in key markets; (iii) Political and governmental regulations impacting sales i.e. Qatar, Algeria International Business posted 2.2% decline in constant currency terms during Q1FY18 Severe currency devaluation of ~54% in Egyptian Pound, ~23% in LIRA and ~55% in Naira led to translation losses SAARC business performed well with double digit growth in Nepal local sales Despite macro economic pressures and unprecedented competitive activity the business largely managed to maintain market shares across markets and categories. Source: Company, Edelweiss research 2 Edelweiss Securities Limited

3 Dabur Table 2: Segmentwise sales growth rate Category growth rate (%) Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Hair Care (3.3) (4.6) (22.8) (4.0) (11.0) Oral Care (5.1) HealthSupplements (7.1) 2.0 (1.1) (5.6) (14.5) 5.0 (7.0) Digestives (2.4) 6.5 (5.6) (3.4) (10.7) (5.0) 4.0 Skin Care (2.2) (3.1) 6.6 (11.4) (0.6) 4.0 Home Care (5.2) (6.5) 6.2 OTC & Ethicals (10.1) (0.7) (11.7) (4.0) (6.6) Food (23.7) (8.3) International contribution to revenue GCC NA NA NA NA NA Egypt NA NA NA NA NA NA NA Q1FY18 concall Key takeaways Source: Company, Edelweiss research Demand, GST and outlook Growth was impacted by destocking in trade. Saw very high promotional intensity in May and June. Overall destocking was of INR1bn. Netting off pipeline reductions, volume offtake was in positive territory. Dabur s inventory levels are at 3x at which market leader HUL works. Impact on wholesale was higher in North and East. Dabur will stick to 5 10% volume guidance which should be 2 nd half heavy. The company will need to achieve volume growth of 8% YoY to reach overall volume growth. Wholesale channel has come out of ICU, but is still in hospital. Wholesale channel is not comfortable with full compliance as yet. Wholesale will shrink. Overall wholesale channel is no where close to normal. This means that Dabur will have to re channelise its distribution network. Wholesale is 35% and MT is ~15%, of which 4% is wholesale cash and carry. Super stock is about 1/3 rd which more so works like wholesale. Direct distribution is 950,000. CSD channel will shrink going forward also as instructed by Ministry of Defence since it believes there are some irregularities. Off take directly to Jawans and Army still continues. Realisation in CSD is little lower than general market. Higher salience in CSD are Amla and Honey lower in Juice and Chawanprash. Inventory days compressed by 7 8 days and the company believes inventory days may stay at these levels. Inventory at distributor is ~18 days. Increased cost in order to compensate for margin to wholesalers etc would be ~1%. From Q2, with GST roll out, optically sales may look lower by 6% since VAT, which was earlier added in top line, will not be added. FY18 would see strong innovations. On account of excise reductions from a few plants there will be ~INR600mn loss, but there will be an offsetting gain from input tax credit. Nature of promotions may change in GST owing to the way laws have been framed. Off invoice will become ~14 15% more expensive. Hence, promotions will shift from off invoice to on invoice. Going forward, 50% of off invoice promotions will move to on invoice. 3 Edelweiss Securities Limited

4 Consumer Goods Domestic FMCG business Primary sales dipped 5% YoY, while secondary sales grew 2% YoY. Dip in volumes was 4.4% YoY. Growth in MT was ~5.8%. Blended price hike is ~1.2%, but owing to promotional intensity that is not getting reflected. For FY18, price hikes will be about 2 3%. Dabur has not taken price increase irrespective of rate increase. There is a possibility of rate increase in Q3FY18. Oral care Toothpaste category grew by 10.4% YoY. Decline in toothpowder resulted in 1.5% YoY growth in the oral care business. Toothpowder declined 35% YoY. Toothpowder is 11% of oral care. Newly launched Red Gel has performed well with good sales in spite of limited launch. National rollout underway. The company is working on reinvigorating Babool brand. There is also a prospect of introducing White ayurvedic toothpaste. Real threat is from Patanjali since there is still strong traction for that brand. Hair care Category declined 11% YoY Sarson Amla, Brahmi Amla and Almond Hair oil performed well. Dabur did not retaliate to competition from Marico in time. But the same will not be repeated in juices category. Sarson Amla hair Oil, Brahmi Amla and Almond Hair Oil performed well in spite of uncertainty & down stocking. Home This category grew by 6.2% YoY. Odomos has been doing good and this franchisee has been on a strong footing. This brand has started to begin its full potential. Skin care This category grew by 4% YoY helped by double digit growth in Gulabari and fem bleaches. Healthcare Health supplements category declined by 7% YoY impacted by short summers and early rains. Market share in Honey has stabilized. Expects sharp improvement in market share. Broadly, the company continues to give 25 30% more as promotion. 4% YoY growth in the digestives business led by Hajmola and Pudin Hara. OTC and ethical dipped by 6.6% YoY. Rolling out Multi Distributor model in key markets : Portfolio being split across distributors to ensure adequate focus on the brands and enhance distribution reach. 4 Edelweiss Securities Limited

5 Dabur Smart usage of resources to build brands and support ATL/BTL activities in challenging market conditions. E Commerce in MENA growing in strong double digits : plans to tap the same. Foods Beverages saw 8.3% YoY decline in sales. Secondary growth was 4% YoY. Foods category was impacted by major de stocking and heightened discounting by competition. No price increase expected in juice category. Early rains in June impacted sales in North & Central India. New flavours such as Real Mosambi and Real Wellnezz performed well In coconut water company faced supply constraints. But once this is solved, company will be able to double the growth rate. Next year company will be able to take the volume up by 2x 3x. Overall juice category has seen lot of promotional intensity and massive destocking. B natural has 9% MS which has increased the competitive scenario. Juices at wholesale level is managed by fat dealers. This kind of dealers specialize in carbonated, NCB and juice category. This category destocking heavily. International business This business declined by 2.2% YoY in constant current terms. International business was impacted by slowdown in MENA and currency devaluation. Nepal saw double digit sales growth. Acquired 100% stake in D&A cosmetics and Atlanta body and health products in South Africa. The brand operated by this company is Long & Lasting. Dabur paid USD3.7mn at 2.2x sales and 13x EBITDA. Geographical expansion opportunities in North Africa, Turkey and Iran : Focus on increasing product lines, range selling and penetration of our brands. Dabur s Namaste business is seeing some steady pick up. Company however believes that their naturals portfolio will be recalibrated and bring growth in North America geography. Expects their Africa business will grow at the same pace as North America business. Margins The company maintained ad spends in India (as % of sales was at 9.6% versus 9.5% in Q1FY17) but the same dipped in the international business. Gross margins may expand on the back of benign raw material prices. However, Dabur will increase media spends and increase in salary expense which may not lead to EBITDA margin expansions. Margins would likely be at same levels as FY17 provided competitive intensity except for Foods segment does not increase. Standalone employee expense has seen an increase owing to some shift from other expense to staff expense owing to move from contract basis to employees coming on Dabur s roll and increase in number of employees. However on consolidated level there has been a reduction at international level. 5 Edelweiss Securities Limited

6 Consumer Goods Capex Sri lanka plant and Uttarakhand factory have been started. 2 tetrapack lines in Uttarakhand. Capex would be INR3bn for FY18. Outlook and valuations: Positive; maintain BUY Dabur is set to benefit from recovery in rural growth (aided by rural centric initiatives announced in Budget), which contributes ~45% to total sales, and a good monsoon. Initially, Patanjali s entry had intensified competition for Dabur. However, now the company has stopped losing market share and the competitive intensity has also waned. To capitalise on this, the company will be launching ayurvedic based products in categories such as oral care, hair care, health supplements, etc., which is envisaged to spur overall growth. Dabur is also set to launch Babool. The company has countered rising competition by enhancing its promotional spending, which has helped wrest back market share, though it will now reduce promotion spend and focus more on media spends, which is a superior strategy and will increase overall visibility of brands. The focus on bolstering its innovation pipeline, especially in natural segment, and premiumising the same will not only help the company gain share in naturals and ayurveda, but also aid margin improvement. The focus on OTC & ethicals, health supplements and foods businesses, further bolstered by Project CORE will play a key role in driving premiumisation for Dabur. Project LEAD and rising coverage of doctors will boost healthcare products. International business is expected to improve led by recovery in Namaste business, though overall geopolitical conditions in the Middle East need to be closely monitored. Backed by strong revival in volume off take and improving market share, we revise up target PE to 36x (earlier 34x), which still is at ~15% discount to peer set, and arrive at revised TP of INR338 (INR327 earlier). Chart 1: One year forward P/E band 500 (INR) x 40x 35x 30x 25x 20x Aug 12 Feb 13 Aug 13 Feb 14 Aug 14 Feb 15 Aug 15 Feb 16 Aug 16 Feb 17 Aug 17 Source: Edelweiss research 6 Edelweiss Securities Limited

7 Dabur Table 3: Consolidated segmental performance Consumer care business Q1FY18 Q1FY17 % growth Y o Y Q4FY17 % growth Q o Q Consumer care business 14,251 15,672 (9.1) 15,508 (8.1) Foods business 3,108 3,274 (5.1) 2, Retail business (2.7) 308 (9.6) Others (15.4) 294 (29.3) Gross income (Excl other income) 17,845 19,477 (8.4) 19,090 (6.5) Year to March PBIT (INR mn) Consumer care business 3,202 3,581 (10.6) 3,773 (15.1) Foods business (35.1) 454 (28.4) Retail business 5 (6) NM 2 NM Others (15) 17 (188.5) 10 (247.5) PBIT 3,517 4,092 (14.1) 4,239 (17.0) Year to March Margin Consumer care business (38) 24.3 (185.9) Foods business (483) 15.2 (478.5) Retail business 1.7 (1.9) NM 0.6 NM Others (7.0) 6.7 (1,375) 3.4 (1,040.1) Margin (130) 22.2 (249.5) Source: Company, Edelweiss research Table 4: Standalone segmental performance Year to March Revenues (INR mn) Q1FY18 Q1FY17 % growth Y o Y Q4FY17 % growth Q o Q Consumer care business 9,533 9,906 (3.8) 11,387 (16.3) Foods business 2,573 2,807 (8.3) 2,634 (2.3) Others (18.4) 297 (30.1) Gross income (Excl other income) 12,313 12,968 (5.0) 14,318 (14.0) Year to March PBIT (INR mn) Consumer care business 2,304 2,583 (10.8) 3,434 (32.9) Foods business (66.1) 306 (64.7) Others (15) 16 (189.6) 12 (223.7) PBIT 2,398 2,918 (17.8) 3,752 (36.1) Year to March Margin Consumer care business (191) 30.2 (599.0) Foods business (715) 11.6 (742.2) Others (7.0) 6.4 (1,343) 4.0 (1,100.2) Margin (303) 26.2 (673.4) Source: Company, Edelweiss research 7 Edelweiss Securities Limited

8 Consumer Goods Table 5: Standalone P&L (INR mn) Q1FY18 Q1FY17 YoY % Change Q4FY17 QoQ % Change Total income from operations 12,337 12,995 (5.1) 14,348 (14.0) Cost of materials consumed 6,735 6,907 (2.5) 7,715 (12.7) Advertising & publicity 1,187 1,236 (3.9) Employee benefits expenses 1,192 1, Other expenses 1,327 1,491 (11.0) 1,384 (4.1) Total expenses 10,441 10,765 (3.0) 10,763 (3.0) EBITDA 1,896 2,230 (15.0) 3,585 (47.1) Other income Depreciation and amortisation expense Finance costs PBT 2,349 2,579 (8.9) 3,922 (40.1) Tax expense (14.7) 900 (43.6) PAT before exceptional 1,841 1,984 (7.2) 3,022 (39.1) Exceptional (145) NM NM PAT 1,696 1,984 (14.5) 3,022 (43.9) As % of net sales COGS Advertising & publicity Staff costs Other expenditure (72) EBITDA (179) 25.0 (961.5) PBT (81) 27.3 (829.6) Net profit (34) 21.1 (614.0) Tax rate (147) 22.9 (132.9) Source: Company, Edelweiss research Chart 2: Sales contribution Others 3% International 33% Chart 3: International business growth rate (%) Domestic 64% 1.0 (15.0) GCC Turkey Egypt Nepal Nigeria Source: Company, Edelweiss research 8 Edelweiss Securities Limited

9 Dabur Chart 4: Category contribution Chart 5: Category growth rates Foods 22% Hair care 23% OTC & Ethicals, 12% Home care 7% Skin care 5% Digestives 6% Health supplemen ts 12% Oral care 18% (%) (4.0) (12.0) (20.0) (11.0) Hair Care Oral Care (7.0) Health Supplements Digestives Skin Care Home Care (6.6) OTC & Ethicals (8.3) Food Source: Company, Edelweiss research Chart 6: Domestic volume growth (%) 4.0 (1.0) (6.0) Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1FY14 Q2 FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Source: Company, Edelweiss research 9 Edelweiss Securities Limited

10 Consumer Goods Financial snapshot (INR mn) Year to March Q1FY18 Q1FY17 % change Q4FY17 % change FY17 FY18E FY19E Net revenues 17,845 19,477 (8.4) 19,090 (6.5) 76,801 83,005 94,185 Other operating income (3.0) Total operating Income 17,901 19,522 (8.3) 19,147 (6.5) 77,014 83,261 94,492 Cost of goods sold 9,145 9,613 (4.9) 9,762 (6.3) 38,432 42,321 47,351 Gross profit 8,755 9,909 (11.6) 9,385 (6.7) 38,582 40,940 47,142 Staff costs 2,035 2,115 (3.8) 1, ,896 8,301 9,230 Advt. sales & promotions 1,500 1,965 (23.7) 1, ,461 7,138 8,100 Other expenses 2,276 2,340 (2.7) 2, ,135 9,712 10,925 Total exp. (excl. cogs) 5,812 6,421 (9.5) 5, ,493 25,151 28,256 EBITDA 2,944 3,488 (15.6) 4,176 (29.5) 15,089 15,789 18,886 Depreciation (1.2) 1,429 1,589 1,693 EBIT 2,553 3,145 (18.8) 3,780 (32.5) 13,661 14,201 17,193 Other income ,984 3,540 3,862 Interest Add: Prior period items Add: Exceptional items Profit before tax 3,233 3,637 (11.1) 4,314 (25.1) 16,104 17,282 20,683 Provision for taxes (16.0) 977 (39.7) 3,303 3,456 4,137 Minority interest (5) (1) NA 1 NA Associate profit share Profit Discontinued Ops Reported net profit 2,649 2,936 (9.8) 3,337 (20.6) 12,769 13,798 16,513 Adjusted Profit 2,649 2,936 (9.8) 3,337 (20.6) 12,769 13,798 16,513 No. of shares (mn) 1,757 1,757 1,757 1,759 1,759 1,759 Diluted shares (mn) 1,757 1,757 1,757 1,759 1,759 1,759 Diluted EPS (INR) (9.8) 1.9 (20.6) Adjusted Diluted EPS (9.8) 1.9 (20.6) Diluted P/E (x) EV/EBITDA (x) ROAE (%) As % of net revenues COGS Employee cost Other expenses Adv. & sales promotions EBITDA EBIT PBT Reported net profit Tax rate Edelweiss Securities Limited

11 Company Description Dabur Dabur has two divisions in India (Consumer care division and Foods division) apart from its international operations. Consumer care division (CCD) offers a wide range of products in hair care, oral care, health supplements, digestives and candies, baby and skin care products based on ayurveda, over the counter (OTC) products, Asavs, and branded ethical and classic products. CHD division has been merged with CCD to leverage distribution. The second division, Dabur Foods Ltd produces fruit juices, cooking pastes, sauces, and items for institutional food purchases. Dabur is well placed among its Consumer Goods peers because of its positioning as an Indian company whose products are derived from exotic sources such as ancient ayurvedic texts and natural ingredients such as herbs. The company has various brand leaders in different market segments Dabur Chyawanprash, a health tonic, and Hajmola a digestive tablet. Real, launched during , has also successfully become the leader in the market. Investment Theme Dabur s broad product portfolio provides a good play on Indian Consumer Goods spend by virtue of its strong presence in less penetrated and high growth categories. Dabur s positioning on the health and wellness platform, backed by its ANH (ayurvedic/natural/herbal) image is very progressive. This, combined with its demonstrated ability to create new categories and sub categories, makes it well placed to capture lifestyle changes led growth in the Consumer Goods space. Dabur has also demonstrated its ability to make and integrate smart acquisitions (Balsara) that complement its product portfolio and thereby drive inorganic growth. Improvement in margins of foods and international businesses are expected to result in improvement in margins for the consolidated operations. Key Risks A slowdown in rural demand due to lower government spending or monsoon failure could impact Dabur s revenues significantly. Further rise in competitive intensity in categories like Shampoo, Oral care, hair oils, juice (ITC has come out with aggressive ads and national rollout) may put pressure on volumes. 11 Edelweiss Securities Limited

12 Consumer Goods Financial Statements Key Assumptions Year to March FY16 FY17 FY18E FY19E Macro GDP(Y o Y %) Inflation (Avg) Repo rate (exit rate) USD/INR (Avg) Company Revenue growth (Y o Y %) Hair care 6.8 (7.8) Health supplements 0.1 (4.6) Oral care Digestives 2.0 (6.3) OTC and ethicals 9.7 (6.5) Home care Skin care 3.9 (2.4) Foods Volume growth (domestic) Price change (domestic) 2.9 (3.0) International bus growth 12.5 (5.3) Excise (% Dom Sales) COGS as % of sales (Con) COGS as % of sales (std) Staff costs (% of rev) A&P as % of sales Coccnut oil (% of COGS) Paradichlorbenzene %COGS LLP(Dom) as % of COGS Gold (Dom) as % of COGS Sorbitol (as % of COGS) Amla Green as % of COGS Financial assumptions Tax rate (%) Capex (INR mn) 2,393 4,473 2,929 3,000 Debtor days Inventory days Payable days Cash conversion cycle Int rate on debt (%) Dep. (% gross block) Dividend payout Yield on cash Income statement (INR mn) Year to March FY16 FY17 FY18E FY19E Net revenue 78,507 76,801 83,005 94,185 Other Operating Income Total operating income 78,688 77,014 83,261 94,492 Materials costs 38,496 38,432 42,321 47,351 Employee costs 7,941 7,896 8,301 9,230 Other Expenses 9,352 9,135 9,712 10,925 Ad. & sales costs 7,716 6,461 7,138 8,100 EBITDA 15,183 15,089 15,789 18,886 Depreciation 1,332 1,429 1,589 1,693 EBIT 13,851 13,661 14,201 17,193 Add: Other income 2, , , ,861.8 Less: Interest Expense Profit Before Tax 15,538 16,104 17,282 20,683 Less: Provision for Tax 2,999 3,303 3,456 4,137 Less: Minority Interest Reported Profit 12,512 12,769 13,798 16,513 Adjusted Profit 12,512 12,769 13,798 16,513 Shares o /s (mn) 1,759 1,759 1,759 1,759 Adjusted Basic EPS Diluted shares o/s (mn) 1,759 1,759 1,759 1,759 Adjusted Diluted EPS Adjusted Cash EPS Dividend per share (DPS) Dividend Payout Ratio(%) Common size metrics Year to March FY16 FY17 FY18E FY19E Materials costs Ad. & sales costs EBITDA margins Net Profit margins Growth ratios (%) Year to March FY16 FY17 FY18E FY19E Revenues 8.1 (2.1) EBITDA 15.4 (0.6) Adjusted Profit Edelweiss Securities Limited

13 Dabur Balance sheet (INR mn) As on 31st March FY16 FY17 FY18E FY19E Share capital 1,759 1,759 1,759 1,759 Reserves & Surplus 39,842 46,767 54,250 63,206 Shareholders' funds 41,601 48,526 56,009 64,965 Minority Interest Short term borrowings 4,628 4,686 4,110 3,535 Long term borrowings 3,415 3,457 3,032 2,608 Total Borrowings 8,043 8,143 7,143 6,143 Long Term Liabilities Def. Tax Liability (net) Sources of funds 51,134 58,191 64,701 72,690 Gross Block 27,802 32,302 35,302 38,302 Net Block 13,104 16,175 17,586 18,893 Capital work in progress Intangible Assets 6,395 6,395 6,395 6,395 Total Fixed Assets 19,947 22,991 24,331 25,639 Non current investments 17,873 22,873 22,873 22,873 Cash and Equivalents 9,569 9,907 14,988 21,152 Inventories 10,965 11,056 11,595 12,843 Sundry Debtors 8,097 6,541 6,843 7,766 Loans & Advances 3,560 3,560 3,560 3,560 Other Current Assets 1,193 1,193 1,193 1,193 Current Assets (ex cash) 23,816 22,350 23,192 25,363 Trade payable 13,302 13,162 13,914 15,567 Other Current Liab 6,769 6,769 6,769 6,769 Total Current Liab 20,071 19,931 20,683 22,336 Net Curr Assets ex cash 3,745 2,420 2,509 3,027 Uses of funds 51,134 58,191 64,701 72,690 BVPS (INR) Cash flow metrics Year to March FY16 FY17 FY18E FY19E Operating cash flow 10,826 16,095 15,784 18,094 Investing cash flow (6,183) (9,473) (2,929) (3,000) Financing cash flow (3,949) (6,285) (7,774) (8,930) Net cash Flow ,081 6,164 Capex (2,393) (4,473) (2,929) (3,000) Dividend paid (4,764) (5,844) (6,315) (7,558) Share issue/(buyback) 3 Profitability and efficiency ratios Year to March FY16 FY17 FY18E FY19E ROAE (%) ROACE (%) Inventory Days Debtors Days Payable Days Cash Conversion Cycle Current Ratio Debt/EBITDA (x) Debt/Equity (x) Adjusted Debt/Equity Net Debt/Equity (0.1) (0.2) Interest Coverage Ratio Operating ratios Year to March FY16 FY17 FY18E FY19E Total Asset Turnover Fixed Asset Turnover Equity Turnover Free cash flow (INR mn) Year to March FY16 FY17 FY18E FY19E Reported Profit 12,512 12,769 13,798 16,513 Add: Depreciation 1,332 1,429 1,589 1,693 Interest (Net of Tax) Others (3,286) Less: Changes in WC 123 (1,325) Operating cash flow 10,826 16,095 15,784 18,094 Less: Capex 2,393 4,473 2,929 3,000 Free Cash Flow 8,432 11,622 12,855 15,094 Valuation parameters Year to March FY16 FY17 FY18E FY19E Adj. Diluted EPS (INR) Y o Y growth (%) Adjusted Cash EPS (INR) Diluted P/E (x) P/B (x) EV / Sales (x) EV / EBITDA (x) Dividend Yield (%) Peer comparison valuation Market cap Diluted P/E (X) EV / EBITDA (X) ROAE (%) Name (USD mn) FY18E FY19E FY18E FY19E FY18E FY19E Dabur 8, Bajaj Corp Emami 4, Hindustan Unilever 40, Marico 6, Source: Edelweiss research 13 Edelweiss Securities Limited

14 Consumer Goods Additional Data Directors Data Dr. Anand Burman Chairman Mr. Amit Burman Vice Chairman Mr. Saket Burman Promoter Director Mr. Mohit Burman Promoter Director Mr. P. D. Narang Executive Director Mr. Sunil Duggal Executive Director, Chief Executive Officer Mr. R. C. Bhargava Independent Non Executive Director Mr. P. N. Vijay Independent Non Executive Director Dr. S. Narayan Independent Non Executive Director Dr. Ajay Dua Independent Non Executive Director S. K. Bhattacharyya Independent Non Executive Director Ms. Falguni Nayar Independent Non Executive Director Auditors M/s G. Basu & Co Chartered Accountants; Internal Auditors:Price Waterhouse Coopers Pvt. Ltd *as per last annual report Top 10 holdings Perc. Holding Perc. Holding Life Insurance Corp Of India 3.26 Commonwealth Bank Of Austr 1.84 Matthews Intl Capital Management 1.77 Blackrock 1.36 Vanguard Group 1.00 Harding Loevner LP 0.72 Prudential ICICI Asset Mgmt Co 0.65 Sun Life Financial Inc 0.45 Genesis Asset Managers LLP 0.44 Schroders Plc 0.35 *as per last available data Bulk Deals Data Acquired / Seller B/S Qty Traded Price No Data Available *in last one year Insider Trades Reporting Data Acquired / Seller B/S Qty Traded 19 May 2017 Ratna Commercial Enterprises Private Ltd Buy Apr 2017 Ratna Commercial Enterprises Private Ltd Buy Apr 2017 Ratna Commercial Enterprises Private Ltd Buy Apr 2017 Ratna Commercial Enterprises Private Ltd Buy Apr 2017 Ratna Commercial Enterprises Private Ltd Buy *in last one year 14 Edelweiss Securities Limited

15 RATING & INTERPRETATION Company Absolute reco Relative reco Relative risk Company Absolute reco Relative reco Relative Risk Asian Paints BUY SO M Bajaj Corp HOLD SU H Berger Paints BUY SO L Britannia Industries BUY SO L Colgate HOLD SP M Dabur BUY SO M Emami BUY SO H GlaxoSmithKline Consumer HOLD SU M Healthcare Godrej Consumer BUY SO H Hindustan Unilever HOLD SP L ITC HOLD SP M Marico BUY SO M Nestle Ltd HOLD SP L Pidilite Industries BUY SO M United Spirits HOLD SP H ABSOLUTE RATING Ratings Expected absolute returns over 12 months Buy More than 15% Hold Between 15% and - 5% Reduce Less than -5% RELATIVE RETURNS RATING Ratings Sector Outperformer (SO) Sector Performer (SP) Criteria Stock return > 1.25 x Sector return Stock return > 0.75 x Sector return Stock return < 1.25 x Sector return Sector Underperformer (SU) Stock return < 0.75 x Sector return Sector return is market cap weighted average return for the coverage universe within the sector RELATIVE RISK RATING Ratings Low (L) Medium (M) High (H) Criteria Bottom 1/3rd percentile in the sector Middle 1/3rd percentile in the sector Top 1/3rd percentile in the sector Risk ratings are based on Edelweiss risk model SECTOR RATING Ratings Overweight (OW) Equalweight (EW) Criteria Sector return > 1.25 x Nifty return Sector return > 0.75 x Nifty return Sector return < 1.25 x Nifty return Underweight (UW) Sector return < 0.75 x Nifty return 15 Edelweiss Securities Limited

16 Consumer Goods Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai Board: (91 22) , Aditya Narain Head of Research Coverage group(s) of stocks by primary analyst(s): Consumer Goods Asian Paints, Bajaj Corp, Berger Paints, Britannia Industries, Colgate, Dabur, Godrej Consumer, Emami, Hindustan Unilever, ITC, Marico, Nestle Ltd, Pidilite Industries, GlaxoSmithKline Consumer Healthcare, United Spirits Recent Research Date Company Title Price (INR) Recos 03 Aug 17 Colgate Palmolive Decent show despite GST; share gains to be gradual; Result Update 03 Aug 17 Emami Dismal quarter, outperformance ahead ; Result Update 02 Aug 17 Marico Temporary blip, recovery to start in Q2FY18; Result Update 1,083 Hold 1,105 Buy 326 Buy Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Buy Hold Reduce Total Rating Interpretation Rating Expected to Rating Distribution* * 1stocks under review > 50bn Between 10bn and 50 bn < 10bn Market Cap (INR) Buy Hold Reduce appreciate more than 15% over a 12 month period appreciate up to 15% over a 12 month period depreciate more than 5% over a 12 month period One year price chart (INR) Aug 16 Aug 16 Sep 16 Oct 16 Oct 16 Nov 16 Dec 16 Dec 16 Jan 17 Feb 17 Mar 17 Mar 17 Apr 17 May 17 May 17 Jun 17 Jul 17 Jul 17 Dabur 16 Edelweiss Securities Limited

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