dabur report - icici directr

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ICICIdirect.com|Equity Research1 | P a g e

August 18, 2009 | FMCG

Initiating Coverage

Dabur India (DABIND)

Creating waves in the FMCG spaceDabur India Ltd, (DIL) with its diverse product portfolio, extensive presencein under-penetrated categories and ability to foray into new categories bysuccessfully driving inorganic and organic growth is expected to capitaliseon growing FMCG trends. Subsequently, we expect net sales and net profitto grow at a CAGR of 16.9% and 19.5%, respectively from FY09E-FY11E. Weare initiating coverage on the company with a PERFORMER rating.

Diversification of product portfolio led by inorganic growthDILs product portfolio is present across diverse categories, namely personalcare, health care, home care, foods and classical ayurvedic products. It isexpected to sustain its sales growth momentum buoyed by a slew of productlaunches and synergistic inorganic acquisitions (Balsara & Fem Care PharmaLtd), thereby, enabling it to further supplement its product portfolio.

Renewed focus on international and consumer health businessesOn account of the acceleration in growth witnessed in DILs international andconsumer health businesses, we foresee revenue contributions from thesedivisions increase significantly. Subsequently, we expect the internationalbusiness to contribute 24% to total revenues in FY11E (from 18.5% in FY09),buoyed by expansions into new regions and the consumer health businesscontributing 8.7% to total revenues in FY11E (from 7.3% in FY09) led by newayurvedic product launches in its over the counter (OTC) portfolio.

Effectively set to withstand deficient rainfallAlthough the deficiency in rainfall could affect demand in rural areas, we donot expect DIL to be severely affected, given the non-discretionary nature of itsproducts and its presence across an array of price points. Additionally, since

only 17% of the companys raw material costs are dependent on agri-commodities (sugar and edible oil), we believe the company would be leastvulnerable to inflationary pressures.ValuationAt the current market price of Rs 122, DIL is trading at 23.0x its FY10E EPS ofRs 5.3 and 19.1x its FY11E EPS of Rs 6.4. Although, historically DIL has tradedat a discount to HUL, given DILs high growth rate, foray into new categoriesvia synergistic acquisitions (Balsara and FCPL) and strong earnings visibility,we value the stock at 22.0x its FY11E EPS of Rs 6.4. This is on par with themultiple of HUL. Using the DCF methodology, we have arrived at a fair value ofRs 142, which is 22.0x its FY11E EPS of Rs 6.4. We are initiating coverage onthe stock with a PERFORMER rating.

Current PriceRs 122

Target PriceRs 142

Potential upside16.3%

Time Frame12 months

PERFORMER

Analysts Name

Sanjay [email protected] [email protected]

Sales & EPS trend

500.0

1500.0

2500.0

3500.0

4500.0

FY07 FY08 FY09 FY10EFY11E

0.0

2.0

4.0

6.0

8.0

Net sales (Rs crore) EPS (Rs)

Stock Metrics

Bloomberg Code DABUR IN

Reuters Code DABU.BO

Face value (Rs) 1

Promoters Holding 70.5

Market Cap (Rs cr) 10958.5

52 week H/L 141.9/60

Sensex 14784

Average volumes 299114

Comparative return metrics

Stock return 3M 6M 12M

Hind. Unilever 9.8 1.9 21.6

ITC 7.5 15.3 6.6

Marico 21.9 37.9 21.1Dabur 26.0 45.8 35.0

Price Trend

60.0

80.0

100.0

120.0

140.0

160.0

180.0

5-Ap

r-07

5-Ju

l-07

5-Oc

t-07

5-Jan-08

5-Ap

r-08

5-Ju

l-08

5-Oc

t-08

5-Jan-09

5-Ap

r-09

5-Ju

l-09

Absolute Sell

Target Price

Absolute Buy

Exhibit 1:Key Financials Year to March 31 FY07 FY08 FY09 FY10E FY11E

Net Profit (Rs crore) 282.1 333.7 390.8 455.3 557.8

Shares in issue (crore) 86.3 86.4 86.5 86.5 86.5

EPS (Rs) 3.3 3.9 4.5 5.3 6.4

Growth (%) 17.9 16.9 13.1 22.0

P/E (x) 36.9 31.2 27.1 23.0 19.1

Price/Book (x) 22.0 17.1 12.9 10.5 8.6

EV/EBITDA (x) 31.0 26.2 22.8 19.1 15.9

EBITDA Margin (%) 15.6 17.1 16.6 17.4 17.8

Net Profit Margin (%) 12.8 14.1 13.9 14.0 14.7RoNW (%) 57.8 60.8 54.4 50.0 50.1

RoCE (%) 47.0 51.8 46.1 44.5 45.5

Source: Company, ICICIdirect.com Research


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Company Background

DIL is one of Indias largest FMCG companies positioned as an ayurvedicand herbal specialist with interests in health care, personal care and foodproducts. The company was founded by Dr SK Burman in 1884 as a small

pharmacy in Calcutta (now Kolkata), West Bengal. In 2003, DIL approved thedemerger of its pharmaceuticals business from the FMCG business into aseparate company as part of plans to provide greater focus to bothbusinesses. With this, DIL now largely comprises the FMCG business, whichincludes personal care products, healthcare products and ayurvedicspecialties, while the pharmaceuticals business includes allopathic,oncology formulations and bulk drugs. As part of its inorganic growthstrategy, in FY05 DIL acquired Balsara's hygiene and home productsbusinesses, a leading provider of oral care and household care products inthe Indian market. In 2007, the company merged its wholly ownedsubsidiary, Dabur Foods, into the parent company Dabur India Ltd in orderto unlock operational efficiencies and extract synergies.

The company possesses four strategic business units, namely theconsumer care division (CCD), the international business division (IBD), theconsumer health care division (CHD) and the retail venture (new U) that iscurrently in the development phase. DIL operates under five flagshipbrands, each of which has its own distinct brand identity. These are Daburas the master brand for all natural healthcare products, Vatika for premiumpersonal care, Hajmola for digestives, Real for fruit-based drinks,Chyawanprash for traditional ayurvedic revitalisers and Anmol foraffordable personal care products. In FY09, DIL acquired Fem Care PharmaLtd (FCPL), a leading player in the skin care segment for Rs 203.7 crore in anall-cash deal.

Shareholding pattern (Q1FY10)

Shareholder % holding

Promoters 70.5

Institutional Investors 22.3

Other Investors 6.6General public 0.48

Promoter & Institutional holding trend (%)

70.7 70.7 70.7 70.5

22.322.522.322.1

0.0

20.0

40.0

60.0

80.0

Q2FY09 Q3FY09 Q4FY09 Q1FY10

Promoters Institutional Investors


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Exhibit 2:Dabur business model (FY09)


* Includes international business

**Includes retail business

Dazzl

Sanifresh

Odomos

Dabur Honey

Real & Activ Hommade

Others**(2.8%)

Foods(11.8%)

Culinary

Dabur *Revenues Rs 2834.1 crore

Consumer Health Division(7.5%)

Hair Care(32%)

OTC (57%) Ethical(43%)

Oral Care(18%)

Baby & SkinCare (5%)

Digestives &Candies (7%)

Health Supplements(19%)

Home Care(6%)

Vatika

Dabur Red

Babool

Meswak HajmolaGulabari

Odonil

Chyawanprash

Consumer Care Division(77.8) %)

Uveda

Promise

Lal Dant Manjan

Juices

Dabur GlucoseDabur Amla

Anmol


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Investment RationaleDiverse product portfolio to sustain sales growth momentumDIL is present across a wide spectrum of market segments namely, personal care,healthcare, home care and foods. Buoyed by this diverse product portfolio, a slewof product launches and synergistic inorganic acquisitions, DILs revenues havegrown at a CAGR of 12.9% from Rs 1371.0 crore in FY03 to Rs 2834.1 crore in FY09.The company reported a 19.1% YoY growth in revenues post the Balsara

acquisition. This supplemented its oral care portfolio and enabled it to foray into thehome care category. In light of the successful turnaround of Balsara, DIL hasdemonstrated its ability to integrate acquisitions and complement its productportfolio. Subsequently, post the Fem Care Pharma Ltd (FCPL) acquisitionundertaken in FY09, we expect the company to deliver similar results, bysuccessfully integrating its skincare portfolio and gaining significant presence in theskin care market. This will enable sales to grow at a CAGR of 16.9% from FY09-FY11E. Furthermore, we believe any further acquisitions undertaken will enable DILto diversify further by adding new lines of growth and giving a fillip to revenuesaccordingly.

Exhibit 3:Sales growth from FY03-FY11E

7.0%

19.1%

15.0%

6.8%

15.4%

-3.1%

13.5%

15.7%13.3%

500

1000

1500

2000

2500

3000

3500

4000

4500

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10E FY11E

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Sales (Rs crore) Sales growth (Y-o-Y)

BalsaraAcquisiton

Fem

Acquisition

?????


Altering the revenue mix with a renewed focusThe company primarily operates through three strategic business units, namely theconsumer care division (CCD), the consumer health division (CHD) and theinternational business division (IBD).

Exhibit 4:Revenue contribution of DILs strategic business units (Rs crore)

1329.7 1518.91821.2 2063.2 2254.8 2596.7

152.0 156.4143.8 206.9 261.4 337.2

209.0 290.4383.4 524.3 722.2 930.1

190.0 245.7

11.629.439.747.919.0 22.3

0%

20%

40%

60%

80%

100%

FY06 FY07 FY08 FY09 FY10E FY11E

CCD CHD IBD Foods Others


Any furtherinorganic

acquisitions would

accelerate growth

further


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The CCD division remains the largest contributor to revenues. However, itscontribution to sales was lower in FY09 at 72% on account of higher revenueinflows from the CHD and IBD, which contributed 7.3% and 18.5%, respectively, inFY09 as against 6.0% and 16% in FY08. On account of the acceleration in growthwitnessed across international regions, we expect the IBD to contribute 24% ofrevenues in FY11E buoyed by geographic expansions into new regions such asUzbekistan, Guinea and Belarus. In addition to this, with planned initiatives aimed at

introducing new ayurvedic products in modern, ready to use formats, which wouldfurther complement the companys OTC portfolio, we expect the CHD to contribute8.7% of revenues in FY11E.

Consumer care division to grow by inorganic leaps and organic boundsThe CCD, which forms the mainstay of DILs business, has grown both organicallyand inorganically registering a CAGR sales growth of 23% from Rs 1185.5 crore inFY06 to Rs 2207.1 crore in FY09.

Exhibit 5:Organic and inorganic growth driving CCD (FY05-FY09)

- Inorganic growth - Organic growth


On acquiring the loss making Balsara Hygiene and Home Products and turning itinto a profitable business within six months, DIL gained market share in categoriessuch as oral care and home care where it had a negligible presence. In light of theBalsara turnaround, wherein DIL demonstrated its ability to grow inorganically andcomplement its product portfolio successfully, we expect the FCPL acquisition(FY09) to deliver similar results. DILs acquisition of FCPL for 2.6x its FY09 sales, at aprice per share of Rs 800, seems expensive. However, we believe FCPLs extensiverange of products will augur well for the company, which is looking to expand itspresence in the skin care segment. We expect FCPL to add around 4% to thetopline and 3% to the EPS in FY10E-FY11E.

Exhibit 6:Valuation multiples for FCPL acquisition (FY09)FCPL Acquisition (FY09)

EV (Rs crore) 300

EV/EBITDA (x) 18

P/E (x) 26


2002-2005

Family Products &Health Care

2005-2006

Acquired Balsara forRs 143 cr

2007-2008

Integration of FoodsDivision

2008-2009

Acquired Fem Care72.3% for Rs 203.7 cr

Oral Care(Babool, Meswak,

Promise)

Home Care(Odonil, Sanifresh,

Odopic, Odomos)

Fruit juices(Real & Activ)

Culinary additives(Hommade)

Consumer Products(Oxybleach, Saka (Fem

Stratum,Fem, Botanica)

Pharma Products(Aloederm, Restoderm &

Femnicol)

ConsumerCare

DivisionHair Care

Digestives

Health Supplements

Baby & Skin Care


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The acquisitions undertaken will fuel growth inorganically by unlocking synergiesand eradicating duplicity in distribution and marketing. Additionally, the ongoingproduct/variant launches, forays into new and sub-categories and integration of thefoods division (a wholly owned subsidiary of the company that was merged withthe parent company) with the CCD will boost growth organically. Furthermore,given the vast market size and abysmally low penetration levels prevalent in certainkey categories (as given below) in which the CCD operates, we expect CCD

revenues to increase to Rs 2254.8 crore in FY10E and to Rs 2596.7 crore in FY11E.

Exhibit 8:FMCG category sizes and penetration levels (FY08-FY09)Category Name Industry Size (Rs crore) Urban Penetration(%) Rural Penetration(%)

Health Supplements * Rs 401.4 14 5

Digestive Tablets Rs 179.3 NA NA

Branded Candies Rs 694.1 NA NAPackgaed Fruit Juices Rs 1300.0 30 10

Shampoos Rs 2085.0 62 46

Hair Oils Rs 3315.0 96 93

Air Fresheners Rs 75.4 NA NA

Toothpaste Rs 2593.2 79 45

Toothpowder Rs 530.1 26 33

Floor Cleaners Rs 71.0 22 2

Fairness Creams Rs 1100.0 20 14

Skin Care Rs 2000.0 30 19

Mosquito Repellants Rs 667.0 59 18 Source: Company, ICICIdirect.com Research

* Includes Chyawanprash and Glucose

Exhibit 7:Category wise revenue distribution of the CCD (Rs crore)

438.8 501.2 509.9 641.7 676.4 802.4

292.5 334.2364.2 379.6 421.7 493.4

279.2 334.2346.0 387.9 399.1 446.6

133.0 136.7

145.7 150.6 151.1 161.0

106.4 106.3

109.3 111.4 157.8 187.0

236.8 274.4 315.7 371.3

79.8 106.3 117.6109.3 133.0 135.0

0%

20%

40%

60%

80%

100%


Hair care Oral Care Health Supplement Digestives

Baby Oil & Skin Care Foods Home Care



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Hair CareWith a CAGR sales growth of 20.6% from FY06 to FY09, DILs hair care categoryremains the largest contributor to CCD with a 31.1% contribution in FY09. Thecompany, which operates in the coconut based, amla based and light hair oilmarket continued to keep pace with the hair oil market growing at 22.8% in FY09and 15.8% in Q1FY10 respectively. With the introduction of a Re 1 sachet, DaburAmla the dominant brand in the heavy amla based hair oils market (industry size- Rs

538.0 crore), grew by 20.4% in FY09 and 14.3% in Q1FY10. Dabur Anmol SarsonAmla also grew by 29.7% in FY09 on the back of consistent promotional efforts todrive its reach in mass markets.

Exhibit 9:Market share of DILs amla brands in amla hair oil market & growth of DILs brands vis--vis amla hair oil industry (%)

75.9 75.4 75.8 75.6 75.9 75.7 76.5

7.4 6.9 7.2 7.4 7.4 7.0 7.25.5 5.3 4.9 4.5 4.7 4.9

11.2 11.8 11.7 12.1 12.2 12.7 11.4

5.9

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

FY06

FY07

FY08

Q1FY09

Q2FY09

Q3FY09

Q4FY09

Value

M

arketShare(%)

Dabur's Amla brands * Marico Bajaj Consumer Care Others

0.0

10.020.0

30.040.050.060.070.0

FY07

Q

1FY08

Q

2FY08

Q

3FY08

Q

4FY08

Q

1FY09

Q

2FY09

Q

3FY09

Q

4FY09

Grow

th(%)

Amla hair oil industry Dabur Amla Dabur Anmol


*Includes Dabur Amla and Dabur Anmol Sarson Amla

Driven by improved distribution effectiveness, DILs Anmol coconut oil brand grewby 32.4% in Q4FY09 and 42.7% in Q1FY10. In order to fuel growth, enhance marketshare and expand the hair oil market DIL, forayed into the light hair oil market(industry size Rs 500 crore) in FY09 by launching two variants such as, VatikaEnriched Almond Oil and Dabur Amla Flower Magic Oil.

Exhibit 10:Growth of DILs Anmol coconut oil (%) & DILs market share vis--vis peers in the hair oil market (%)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

FY07

Q1FY08

Q2FY08

Q3FY08

Q4FY08

Q1FY09

Q2FY09

Q3FY09

Q4FY09

Growth(%)

Coconut hair oil industry Dabur Anmol coconut oil

FY09

33.0

17.0

6.0

3.0

41.0

Marico Dabur Bajaj Dey's Lab Others Source: Company, ICICIdirect.com Research


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In the shampoo category, DILs brands have gained both value and volumemarket share in FY09 to 6.5% and 6.1%, respectively. Vatika shampoos,continued to outgrow the industry with a 31.5% growth in FY09 and a 48.6%growth in Q1FY10, led by Vatika Smooth and Silky shampoo. With the launch ofthree variants namely, Henna Cream, Root Strengthening and Black Shine theVatika brand enhanced its volume market share to 6.8% in FY09 from 5.7% inFY08. In order to drive growth in this segment, DIL has leveraged the Vatika

brand, by foraying into the anti-dandruff shampoo market (that constitutes morethan one-third of the total shampoo market in India) with the launch of VatikaDandruff Control. The company has also launched Dabur Total Protect HealthShampoo, which offers consumers a natural alternative to chemicallyformulated shampoos. By creating a health shampoo category, DIL is not onlyexpanding the shampoo market but also driving growth. As a result of theseinitiatives, we expect hair care revenues to clock a CAGR revenue growth of16.3% from Rs 509.9 crore in FY08 to Rs 802.4 crore in FY11E.

Exhibit 11:DILs market share in shampoo category (%) & growth of DILs brands in the shampoo industry vis--vis the industry (%)

2.0

3.0

4.0

5.0

6.0

7.0

FY06

FY07

FY08

FY09

M

arketshare

(%

)

Value Volume

0.05.0

10.015.020.025.030.035.0

Q1FY08

Q2FY08

Q3FY08

Q4FY08

Q1FY09

Q2FY09

Q3FY09

Q4FY09

Growth(%)

Shampoo indu stry Vatika Smooth & Silky shampoo


Exhibit 12:Growth of Vatika vis--vis anti- dandruff industry & DILs market share in shampoo category vis--vis peers (%)

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

Q1FY08

Q2FY08

Q3FY08

Q4FY08

Q1FY09

Q2FY09

Q3FY09

Q4FY09

Growth(%)

Anti-dandruff industry Vatika Dandruff Control

FY09

6.5

50.5

13.0

26.0

4.0

Dabur HUL Cavin Kare P&G L'oreal



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Oral careDILs oral care segment is the second largest contributor to CCD with a CAGR salesgrowth of 9.1% from Rs 292.5 crore in FY06 to Rs 379.6 crore in FY09. DILstoothpaste portfolio, which includes Meswak (premium brand), Dabur Red (mid-priced) and Babool (economy), recorded a 11.3% growth in FY09 and 20.3% growthin Q1FY10. After two quarters of sluggish growth, Babool bounced back with a 16.4%and 22.8% growth in FY09 and QFY10, respectively. In addition, the Dabur Red brand

continued to grow by 21.4% in FY09 and by 18.4% in Q1FY10.

Exhibit 13:Growth of DILs oral care brands against oral care industry (%)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

FY07

Q1FY08

Q2FY08

Q3FY08

Q4FY08

Q1FY09

Q2FY09

Q3FY09

Q4FY09

Valuegrowth(%)

Toothpaste indusrty Dabur Red Babool Meswak


Although the companys red toothpowder remained sluggish with a market share of30.3% overall, DIL increased its market share in the oral care market to 10% in FY09,making it the third largest oral care provider. With low per capita consumption oftoothpaste and low penetration levels of oral care, particularly in rural areas, we

believe DIL, with the strategic integration of the Balsara brands acquired (Promise,Babool, Meswak) is well positioned to sustain growth in this category.

Exhibit 14:DILs oral care market share growth (%) and market share in oral care market vis--vis peers (%)

2.0

7.07.9

9.410.0

0

2

4

6

8

10

12

FY05 FY06 FY07 FY08 FY09

M

ark

etshare

(%

)

Market share post

Balsara acqusition FY09

10

49

29.2

3.97.9

Dabur Colgate HUL Anchor Others



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ICICIdirect.com|Equity Research1 0 | P a g e

Health supplementsThis segment primarily constitutes three products. These are Dabur Chyawanprash, a flagship brand in this category, Dabur Glucose, a replenishment supplement andDabur Honey. Dabur Chyawanprash, which dominates the branded chyawanprashindustry, witnessed a rise in market share (volume) from 62.3% in FY08 to 64.1% inFY09. Supported by the launch of a new sugar free variant (Dabur Chyawanprakash),growing health concerns and the recent foray into the malted food drinks category

with the launch of Chyawan Junior, Dabur Chyawanprash continues to outgrow thebranded chyawanprash industry.

Exhibit 15:Volume market share of Dabur Chyawanprash vis--vis peers & growth rate vis--vis Chyawanprash industry (%)

60.7 62.7 62.3 61.1 65.1 64.5 64.5

9.3 9.1 10.7 9.58.0 8.7 9.4

12.7 12.7 11.7 14.5 12.4 12.511.3

17.3 15.5 15.3 15.0 14.5 14.3 14.8

0.0

20.0

40.0

60.0

80.0

100.0

120.0

FY06

FY07

FY08

Q

1FY09

Q

2FY09

Q

3FY09

Q

4FY09

M

arketshare(%)

Dabur Emami Baidyanath Others

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

FY07

Q1FY08

Q2FY08

Q3FY08

Q4FY08

Q1FY09

Q2FY09

Q3FY09

Q4FY09

G

rowth(%)

Chyawanprash industry growth

Dabur Chyawanprash growth

Source: Company, A C Nielsen research, ICICIdirect.com Research

Although, Dabur Glucose has grown steadily, it managed to outpace the growth of

the glucose industry only post Q3FY09. It clocked a growth of 34.1% in Q1FY10 onthe back of the launch of two new variants (orange and lemon). With a growth of17.2% in Q1FY10 and the introduction of a sugar free Chyawanprash variant, webelieve the health supplement category will continue to sustain its growth, goingforward.

Exhibit 16:Growth rate of Dabur Glucose vis--vis glucose industry FY07-FY09 (%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

FY07

Q1FY08

Q2FY08

Q3FY08

Q4FY08

Q1FY09

Q2FY09

Q3FY09

Q4FY09

Grow

th(%)

Glucose industry Dabur Glucose

Source: Company, A C Nielsen research, ICICIdirect.com Research


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Foods divisionWith sales growing by 15.8% from Rs 236.8 crore FY08 to Rs 274.4 crore FY09, thefoods division, which once operated as a wholly owned subsidiary, has been mergedback into the parent company and integrated with the CCD. With a 13.3% revenuecontribution to the CCD, the foods division primarily consists of fruit beverages underthe Real & Activ brands and culinary additives under the Hommade brand. Daburs Realand Activ, which registered a 14.9% growth in FY09, dominate the juices market with a

market share of around 50%. By aligning its Activ range of juices in the health andwellness category via the no sugar campaigns we believe the emergence of healthand lifestyle concerns coupled with the launch of new variants (Real Burrst) will enableDIL to capitalise on the growing fruit juice market. Moreover, with plans to expand itsrange of ready to cook products under the Hommade brand, we expect the high margin foods category to sustain its grown momentum with a 16.3% CAGR revenue growth from FY09-FY11E. This division will hence, enhance its revenue contribution to CCDsales from 13.3% in FY09 to 14.3% in FY11E.

Exhibit 17:Market share of DILs Real juice brand vis--vis peers in the juices market (%)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09

Marketshare(%)

Real (Dabur) Tropicana Fresh Gold

Leh Berry Others


Digestives and candiesWith a 7.3% contribution to CCD in FY09, DILs digestive portfolio comprises twoofferings, namely the Hajmola tablet (tasty digestive) and Hajmola candy (tangytasting digestive). Led by a host of marketing campaigns promoting Hajmola as a postmeal digestive, this category registered an 18% growth rate in FY09. With theintroduction of new variants such as Pudina and Nimbu and the rollout of 50 paisesachets, we believe the company will continue to lead the digestives market.

Exhibit 18:Hajmolas market share in the digestive tablets market (%) and DILs market share in the digestives segment (%)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

FY06 FY07 FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY'09

Markaetshare(%)

Hajmola Satmola Others

FY09

32.0

19.014.0

13.0

22.0

Dabur Knoll Glaxo Pfizer Others



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Home CareOn acquiring Balsara, DIL acquired a range of home care products comprising airfresheners (Odonil), mosquito repellents (Odomos) and surface cleaners (Odopic,Sani Fresh). This category contributes 5.7% to CCD sales (as on FY09). With thesoft launch of Sanifresh Extra power in the toilet cleaner market, the launch of twokitchen cleaner variants under the Dazzl brand and the foray into the air freshener

gel category with the Odonil brand, the home care portfolio registered a 9.7%growth in FY09. Aided by initiatives undertaken to expand the Odomos range,including the introduction of a spray format, the brand continues to dominate themarket with an 84% market share. Going forward, we believe the rapid rise inurbanisation will fuel consumer need to live in cleaner and safer environments.Hence, this will enable the company to capitalise on the growth potentialemanating from this under penetrated category.

Exhibit 19:Value market share of Odonil and Odomos in air fresheners and mosquito repellents market vis--vis peers (%)

0.0

20.0

40.0

60.0

80.0

100.0

Q1FY09 Q2FY09 Q3FY09 Q4FY'09

Marketshare(%)

Odonil Others

0.0

20.0

40.0

60.0

80.0

100.0

Q1FY09 Q2FY09 Q3FY09 Q4FY09

Marketshare(%)

Odomos Others


Baby & skin careDabur Lal Tail, a key product in the baby massage oil segment grew by 20% in FY09on the back of unabated promotional initiatives. Driven by increasing sales ofGulabari rose water and its extension into the mainstream skin care market with theintroduction of new products such as Gulabari Moisturizing Cold Cream andGulabari Premium Rose Touch Face Freshener spray, the Gulabari brand grew by40.6% in FY09 to Rs 40.0 crore. In Q3FY09, DIL acquired FCPL a leader in thefairness bleach category with a 60% market share.

Exhibit 20:FCPL segment wise revenue distribution in FY09 (%)4

11

17

53

7

8

Exports Liquid Soap Pharma Bleach Hair removal Others



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The skin care category (including baby care) contributes only 5.4% to total CCDsales as on FY09. However, with the acquisition of FCPL and the companys plan tohinge its skin care business vis--vis three platforms namely, Gulabari (herbal), Fem(synthetic) and the recently launched ayurvedic platform (Uveda), we expect thissegment to contribute 7.2% to CCD sales in FY11E. By leveraging Fems distributionnetwork (which consists of 25,000 parlours) for the promotion and cross-selling ofupcoming products within its Gulabari and Uveda product range, we believe DIL

will become the third largest player in the skin care market.

Exhibit 21:Market size, growth rate and Fems market share in key operational categoriesCategory Market Size (Rs crore) Growth rate (%) Fem Market Share (%)

Skin bleach 85 15 60

Hair remover 115 22 7

Liquid hand wash 50 25 18


Dabur to widen its international blueprintDILs international business can be bifurcated into two. It consists of focus markets,where the company chiefly operates with its own manufacturing facilities throughits subsidiaries. It also constitutes potential markets, where the company providespromotional support to its products by catering to specific geographies.

DILs international business spans across key geographies such as South Asia,North & West Africa and the Middle East. With sales growing at a CAGR of 34.4% from Rs 216.0 crore in FY06 to Rs 524.3 in FY09, the international business hasemerged as the fastest growing division in the company.

Exhibit 23:IBDs revenue growth and contribution to total revenues (FY06-FY11E)

209.0290.4

383.4524.3

722.2

930.11113

1618.5

22.1

24

0.0

200.0

400.0

600.0

800.0

1000.0


0

5

10

15

20

25

30

Revenues (Rs crore) Contribution to Total Revenues (%)


Exhibit 22:Daburs International (IBD) blueprint


Potential Markets(15-20%)

East & SouthAfrica

United Kingdom Russia & CIS

Focus Markets(75-80%)

Middle East & North &West Africa

South Asia North America


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This acceleration in revenues supported by strong volume growth in the haircare and oral care categories has significantly enhanced the contribution of theinternational business division to consolidated revenues from 11.4% in FY06 to18.5% in FY09. Although the focus markets continue to contribute a majority ofthe revenues, we believe the growth emanating from the companys potentialmarkets led by geographical expansion into new economies such asUzbekistan, Guinea and Belarus will enhance IBDs contribution to total

revenues from 18.5% in FY09 to 24% in FY11E.

Exhibit 24:Subsidiaries of Daburs international business (IBD) and their growth in revenues from FY06-FY09 (Rs crore)

194.8

219.9

244.7

272.1

38.8

72.1 72.1

14.4 9.2 15.930.4

63.2

112.7

142.8

223.0

77.1

33.413.613.2 20.7

0.0

50.0

100.0

150.0

200.0

250.0

300.0

FY06 FY07 FY08 FY09

Dabur Nepal Pvt. LtdDabur International (UAE)Weikfield International Ltd. (UAE)Asian Consumer Care Pvt.Ltd (Bangladesh)


DILs international subsidiaries, which include Gulf Cooperation Council(GCC), Egypt, Nigeria, Nepal and Bangladesh, form the mainstay of the

international business division. Led by strong performances in the Vatikahair oil and hair cream franchise, Dabur Egypt, Dabur International andWeikfield International (which cater to the Middle East and North Africanregions) have registered a CAGR sales growth of 68.3%, 42.5% and 29.2%,respectively, from FY06 to FY09. In addition to this, Asian Consumer Care,Bangladesh and Dabur Nepal Pvt Ltd grew by 56% and 11%, respectively, inFY09 on the back of the new launches and marketing initiatives undertaken.

Asian Consumer Care

Pakistan

Dabur Egypt Limited

Naturelle LLC (UAE)

Asian Consumer Care

Ban ladesh

African Consumer

Care Ni eria

Weikfield

International UAE

Dabur International

UAE

Dabur Nepal Pvt. Ltd

DILs InternationalSubsidiaries


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Consumer healthcare the new driving forceDILs CHD, which comprises a range of healthcare products, can be classifiedinto over the counter products (OTC) and ethicals. While the Indian OTC marketis estimated at Rs 750 crore, the Indian ethicals market is estimated at Rs 50crore. DILs OTC portfolio encompasses generics and branded productsnamely, healthcare products such as Dashmularishta and Ashokarishta, cough

syrups (Dabur Honitus), Dabur Active Antacid and Badam Tail. It contributes57% to total CHD revenues and commands a 10% market share in the OTChealth category.

Exhibit 25:A break-up of the consumer health division (CHD)


* OTC-Over the counter

Although CHD sales grew only moderately by 5.4% to Rs 155.8 crore in FY08, it registered a 32.7% growthin FY09 on account of new launches and robust growth across categories. While the Honitus franchise grew

by 13.6%, led by the launch of the honey mint and mulethi powder variants, Dabur Badam Tail posted salesof Rs 6.0 crore, growing by 20.6% in FY09. With aggressive marketing initiatives and the transfer of keybrands mainly, Hingoli, Janam Ghunti, Pudin Hara, Sat Isab Gol and Gripe water from the CCD to the CHD,the company plans to renew its focus on CHD. Hence, we expect the company to enhance the contributionof CHD to total revenues, going forward.

Exhibit 26:CHD sales growth and EBITDA margin (FY06-FY11E)

152.0 156.4 143.8206.9

261.4

337.2

26.3

25.2

27.2 27.3

2828.5

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0


23

24

25

26

27

28

29

Revenues (Rs crore) EBITDA margins (%)


CHD Portfolio

OTC*(57%) Ethicals (43%)

Branded ProductsGenerics Branded ethicalsClassicalsTonics


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Aggressive product/variant launchesNew products and innovations contribute around 6-7% of the companysrevenues. With the intention of keeping the brand salient in the mind of theconsumer and driving topline growth across its strategic business unitsnamely, CCD, CHD and IBD the company continues to leverage its brandingand distribution to launch a host of brand extensions/variants across. Theseinclude the following:

Exhibit 27:New product and variant launches CCDCategory FY08 FY09

Hair Care

Vatika Smooth & Silky Shampoo Vatika Enriched Almond Hair Oil

Vatika Black Shine Shampoo Dabur Amla Flower Magic Hair Oil

Vatika Smooth & Silky Conditioner Vatika Dandruff Control

Vatika Black Shine Conditioner Dabur Total Protect Health Shampoo

Oral Care

Babool Neem

Foods

Real Apple Nectar Real Burrst - mixed fruit, apple, orange & mango

Activ Mixed Fruit Vegetable & CarrotSkin Care

Gulabari Hydrating Rose Crme & lotion Gulabari Moisturizing Cold Cream & Lotion

Gulabari Premium Rose Face Freshener

Health Supplments

Chyawan Junior (malted drink) Dabur Glucose Lemon and Orange

Chyawanprakash Sugar free

Digestives Hajmola Natkhat Nimbu,Kachcha Aam & Mint Masala Hajmola Pudina and Nimbu

Home Care

Odonil Jasmine Mint,Spring Scents Dazzl -Floral,Lemon and Pine

Dazzl Disinfectant & Anti-bacterial Sanifresh Extra PowerOdonil Gels

Odomos Naturals


Exhibit 28:New product and variant launches - IBDFY08 FY09

Amla Jasmine Hair Oil Dabur Amla Hair Cream

Vatika Hammam Zaith-Hair Oil Treatment Vatika Cactus Hair Oil

Dabur Herbal Gel Vatika Oilve Light Hair Oil

Vatika Hair Cream Vatika Naturals Nourish & Protec Styling Cream

Vatika Olive Hair Oil Vatika Naturals Dandruff Guard Styling Cream Source: Company, ICICIdirect.com Research

Exhibit 29:New product and variant launches- CHDFY08 FY09

Dabur Active Blood purifier Honitus -Mulethi Power & Honey Mint

Bhringaraj Ayurvedic Tail Dabur Super Thanda Tail

Dabur Almond Oil Dabur Active Antacid

Badam Tail



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Effective cost pressure measures to protect margins and tackle paucity in monsoonsIn an inflationary environment, most FMCG companies are compelled to takecalibrated price increases in order to protect EBITDA margins and simultaneously,maintain volume growth and market share. As a result of this practice, wheninflation reached its peak of 12-13% in September 2009, on the back of a rise incrude based and agri-based commodity prices, several FMCG companies tookprice hikes to pass on some of the increase in raw material costs to consumers.

Exhibit 30:Crude oil prices (US $ per barrel) and sugar prices (Rs per kg)

0

20

40

60

80

100

120

140

160

Jul-07

Sep-0

7

Nov-0

7

Jan-0

8

M

ar-08

M

ay-0

8

Jul-08

Sep-0

8

Nov-0

8

Jan-0

9

M

ar-09

M

ay-0

9

Jul-09

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0

32.0

M

ay-0

8

Jul-08

Sep-0

8

Nov-0

8

Jan-0

9

M

ar-09

M

ay-0

9

Jul-09


However, while most FMCG companies raised prices by around 15-20%(average), DIL raised prices by only 5%, thereby enabling the company tomaintain margins effectively in an inflationary scenario. We can attribute this

to several cost management initiatives undertaken by the company. Theseinvolve aggressive planning, forecasting and hedging especially oninternational exchanges and the dependence of the companys input basket(crude derivatives, herbs, sugar and edible oils) on commodities.

Exhibit 31:DILs input basket inflation vis--vis the economys inflation (April 2009-December 2009)

-2

0

2

4

6

8

10

12

14

Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

Economy Inflation DIL's input basket inflation without hedging DIL's input basket inflation after hedging

Average Economy

Inflation = 10.1%

Average Inflation of DIL's

managed basket = 4%



18/26


Although, the delay in the onset of monsoons could affect FMCG demandin rural areas, we do not expect the company to be adversely affected onaccount of the non-discretionary nature of FMCG products. Moreover, webelieve the companys presence across an array of price points willenable it to benefit from any down trading possibilities. The paucity inmonsoons and rising EL Nino risks can be compared to the droughtsituation in 2002-03, wherein lower agricultural GDP growth resulted in

lower FMCG Y-o-Y growth. However, in the current period (2008-09), webelieve the impact on consumption will be offset by increasedgovernment efforts aimed to boost disposable incomes in rural Indiaincluding higher allocations to the National Rural Employment GuaranteeScheme (NREGS), farm loan waivers and higher minimum support prices(MSPs).

Exhibit 32:Correlation of FMCG growth to Agri GDP growth and GDP growthAgri GDP (%) GDP Y-o-Y (%) FMCG Y-o-Y (%)

FY03 -7.2 3.8 -2.0

FY04 10.0 8.5 3.5

FY05 0.0 7.5 8.0

FY06 5.8 9.5 9.8

FY07 4.0 9.7 17.8

FY08 4.9 9.0 16.1

FY09 1.6 6.7 16.0


Conversely, with the scarcity in monsoons further aggravating the rise inagri-commodity prices such as sugar, edible oil and honey, we believe thecompany would have to undertake price increases in order to pass on anyrise in the cost of these raw materials and ease pressure on margins.However, since sugar and edible oils, (which are mainly affected by

drought like situations), constitute only 3.5% and 13.7% of total rawmaterial cost, DILs input basket will be less vulnerable to inflationarypressures. Additionally, given the companys ability to manage costpressures effectively, we expect the company to effectively combatinflation and protect margins.


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Risks & Concerns

Delay in retail forayThe company, which had planned to establish 350 retail stores of minimumstore area of 700 sq ft and maximum area of 6000 sq ft over a period of five

years, has trimmed down expansion plans due to severe financial pressures faced by the retail industry. The company has opened nine stores and isfine-tuning the format, location strategy and the rental costs of the stores toreflect the fall in real estate prices. However, the velocity of sales expectedhas been adversely impacted, thereby pressurising margins. Any significantlosses incurred can subsequently impact earnings.

Foreign currency risksSince a significant portion of the companys revenues is earned in foreigncurrencies, any expansion into new geographies exposes them to additionalforeign currency risks associated with such diversification.

Deficient monsoonsDepending on the severity of the monsoon deficiency, the company (whichderives around 50% of its revenues from rural areas) can be significantlyimpacted on account of a slowdown in rural spending.

Inflationary pressuresKey raw materials for the company, which include edible oils, sugar andcrude, are susceptible to inflationary pressures. This is especially so withthe shortfall in monsoons. Subsequently, any significant rise in them canhamper margins.


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Financials Steady growth in salesSales in FY09 grew by 18.3% to Rs 2834.1 crore from Rs 2396.3 crore in FY08.This was on the back of robust volume growth in key categories such astoothpaste, hair care and foods especially in rural India. It was led by rural Indiaalong with the resurgence of the international business division. Going forward,

we expect net sales to grow at a CAGR of 16.9% over FY09-11E from Rs 2834.1crore in FY09 to Rs 3875.6 crore in FY11E. This will be led by new productlaunches and the companys foray into skincare via the FCPL acquisition. Thecompany is expected to benefit from a better distribution footprint andoperational efficiencies.

Exhibit 33:Consolidated revenue growth (Rs crore)

1899.6

2233.72396.3

2834.1

3267.9

3875.6

700

1200

1700

2200

2700

3200

3700

4200



EBITDA margin to improveThe EBITDA margin dipped to 16.6% in FY09 from 17.1% in FY08 mainly on

account of severe inflation witnessed during the year. This was fuelled by the

drastic rise in agri-commodity and crude oil prices. Going forward, however, we

expect the EBITDA margin to improve to 17.4% in FY10E and 17.8% in FY11E.

This will be on account of higher contributions from high margin businesses

such as foods (CCD) and consumer health (CHD), a decline in some key input

costs and the consolidation of FCPLs skin care product portfolio.

Exhibit 34:EBITDA margin (%)

15.415.6

17.1

16.6

17.417.8

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0




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Net profit to grow at 19.5% CAGRThe net profit has grown by 17.5% to Rs 390.8 crore in FY09 against Rs 333.8crore in FY08 on the back of higher EBITDA margin led by higher contributions from fruit juices and skin care segment post the acquisition of FCPL. Goingforward, we expect the bottomline to grow at a CAGR of 19.5% over FY09-11Eto Rs 557.8 crore in FY11E mainly backed by sustainable EBITDA margin.

Exhibit 35:Net profit growth (Rs crore)

226.6282.2

333.8

390.8

455.4

557.8

0.0

100.0

200.0

300.0

400.0

500.0

600.0



Return ratios remain attractiveDespite the companys foray into retail, return ratios remain at attractive levels.

In FY09, DILs ROCE and ROE dipped to 46.1% and 54.4%, respectively, due to

the acquisition of FCPL. This resulted in funds being deposited in an escrow

account for which the corresponding returns were not yet accruing to thecompany. Although we expect the return ratios to dip in FY10E on the back of

retail losses we expect the company to sustain ratios in FY11E, once the FCPL

consolidation is complete.

Exhibit 36:Return ratios (%)57.8

60.854.4

50.0 50.1

47.051.8

46.1 44.5 45.5

0.0

10.0

20.030.0

40.0

50.0

60.0

70.0

FY07 FY08 FY09 FY10E FY11E

ROE ROCE



22/26


ValuationsHistorically, the stock has traded in a range of 15-29x its one-year forward earnings.At the current market price of Rs 122, DIL is trading at 23.0x its FY10E EPS of Rs 5.3and 19.1x its FY11E EPS of Rs 6.4. Although historically, DIL has traded at adiscount to Hindustan Unilever (Indias largest FMCG Company), given DILs highgrowth rate, foray into new categories via synergistic acquisitions (Balsara and

FCPL) and strong earnings visibility, we value the stock at 22.0x its FY11E EPS of Rs6.4. This is on par with the multiple of HUL. With a renewed focus on the rapidlygrowing international, consumer health businesses and the acquisition of FCPL, wehave assigned a fair value of Rs 142 per share.

Exhibit 37:P/E Band

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Mar-07

May-0

7

Jul-07

Sep-0

7

Nov-0

7

Jan-0

8

Mar-08

May-0

8

Jul-08

Sep-0

8

Nov-0

8

Jan-0

9

Mar-09

May-0

9

Jul-09

Sep-0

9

Nov-0

9

Jan-1

0

30x

25x

20x

15x


Exhibit 38:Peer Comparison (FY11E)Estimates FY11E Marico Dabur HLL Colgate Nestle

Revenue (Rs crore) 3135.9 3875.6 20397.8 2239.5 5931.8

EPS(Rs) 4.6 6.4 12.2 29.4 76.9

P/E(x) 19.3 19.1 21.2 20.5 28.6

EV / EBITDA(x) 12.8 16.7 17.6 16.5 16.6

Market cap / Sales(x) 1.6 2.8 2.7 3.6 3.4

Market Cap(Rs Crore) 5176.5 10958.5 56022.8 8200.0 20990.0

EBITDA Margins (%) 11.9 17.8 15.9 20.7 20.6

RoE (%) 36.5 48.9 98.6 135.4 128.0

CMP (Rs) 89.0 122.0 260.0 603.0 2202.0

Source: Company, ICICIdirect.com Research, Bloomberg

Market cap to salesWe compare DIL with its peers on a market cap to sales basis. The stock is tradingat 2.8x its FY11E sales, which is at a 22% discount to Colgates market cap to salesand 17.6% discount to Nestls market cap to sales. Volume growth from rural Indiais outpacing growth from that of urban India. Hence, we believe DIL, which derives50% of its revenues from rural India and aggressively engages in new launches,would be able sustain its growth momentum. Subsequently, we believe DIL should

command a market cap to sales multiple of 3.2x, which translates to a fair value ofRs 142 per share.


23/26


24/26


Profit & loss account (Rs Crore)

Year End March FY07 FY08 FY09 FY10E FY11E

Revenues 2233.7 2396.3 2834.1 3267.9 3875.6

Raw Material Cost 971.1 1115.4 1376.2 1584.6 1893.0

Staff Cost 166.7 199.3 234.7 259.9 304.2

Administrative & Selling Cost 560.4 476.2 569.7 549.4 644.4

Other Operational Cost 155.2 166.5 158.8 293.4 285.1

Total Expenditure 1853.4 1957.4 2339.4 2687.3 3126.7

EBITDA 343.2 403.7 466.1 563.5 675.3

Growth (%) 17.6 15.5 20.9 19.8

EBITDA margins (%) 15.6 17.1 16.6 17.4 17.8

Other Income 25.9 34.0 46.8 35.0 33.0

Interest 15.4 11.8 23.2 14.3 14.0

Depreciation 34.3 36.4 44.9 45.6 46.6

Profit before tax 319.5 384.4 444.8 523.5 626.8

Tax 37.3 50.7 54.0 83.2 89.9

Net Profit 282.2 333.8 390.8 455.4 557.8

EPS 3.3 3.9 4.5 5.3 6.4EPS growth (%) 17.9 16.9 16.4 22.5

Balance sheet (Rs crore)


Equity Capital 86.3 86.4 86.5 86.5 86.5

Reserves & Surplus 393.3 531.2 732.3 914.4 1137.6

Net Worth 479.6 617.6 818.8 1001.0 1224.1

Total Loans 159.9 99.2 227.6 246.7 252.5

Deferred Tax Liability 25.9 27.3 30.5 22.3 26.3

Minority Interest 4.5 4.8 4.6 6.6 7.3

Total Capital employed 669.8 748.8 1081.5 1276.5 1510.2Gross Block 617.2 729.7 858.5 1008.5 1058.5

Depreciation 238.1 264.4 299.3 345.0 391.5

Net Block 379.2 465.3 559.2 663.5 667.0

Capital Work in Progress 0.0 0.0 0.0 40.0 40.0

Investment 80.7 203.7 347.0 265.0 275.0

Inventories 257.1 302.5 375.5 432.8 506.9

Debtors 142.0 172.3 177.9 270.5 338.0

Cash 60.7 76.6 148.4 68.2 61.6

Loans and Advances 180.7 222.5 249.0 315.6 422.4

Deferred Tax Asset 1.4 24.0 23.5 8.0 6.0

Total Current assets 640.5 773.9 950.8 1087.1 1328.9

Creditors 352.5 452.6 475.8 631.2 633.7

Other Current Liabilities 99.3 279.5 331.9 158.8 173.8

Miscellaneous Expenses 19.8 14.0 8.6 2.8 0.8

Total Current Liabilities 451.8 732.1 807.6 790.0 807.5

Net Current Assets 188.7 41.8 143.2 297.2 521.4

Total capital deployed 669.8 748.8 1081.5 1276.5 1510.2


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Cash flow (Rs crore)


Profit before tax 319.5 384.4 444.8 538.5 647.7

Depreciation 34.3 36.4 47.4 45.6 46.6

Other items 16.3 17.7 9.4 29.5 22.7

Change in working capital -63.3 23.9 -94.7 -234.2 -230.9

Direct taxes paid -81.6 -80.4 -84.8 -97.5 -103.8

Net cash from operating Activities (A) 225.2 382.1 322.2 281.9 382.3

Purchase of fixed Assets -51.3 -124.8 -166.4 -190.0 -50.0

Purchase/Sale of investment -27.4 -112.4 -84.6 82.0 -10.0

Interest and dividend received 0.0 0.0 0.0 0.0 0.0

Net cash used in investing activity (B) -78.7 -237.2 -251.1 -108.0 -60.0

Borrowings 39.6 -62.6 -0.1 19.1 5.7

Dividend paid -176.8 -66.5 -129.7 -273.2 -334.7

Other Items 0.2 0.1 0.1 0.0 0.0

Net Cash used from Financing Activity (C ) -137.0 -129.0 0.68 -254.1 -329.0

Net increase/decrease 9.5 15.9 71.9 -80.2 -6.6

Op bal cash & cash equivalents 51.2 60.7 76.6 148.4 68.2

Closing cash/ cash equivalent 60.7 76.5 148.4 68.2 61.6

Ratios


EBITDA Margins (%) 15.6 17.1 16.6 17.4 17.8

Net Profit Margins (%) 12.8 14.1 13.9 14.0 14.7

RoCE (%) 47.0 51.8 46.1 44.5 45.5

RoE (%) 57.8 60.8 54.4 50.0 50.1

Debt/Equity(x) 0.33 0.16 0.28 0.25 0.21

RM/Sales (%) 29.0 30.8 33.1 39.0 36.5

Employee cost/sales (%) 7.6 8.4 8.4 8.0 8.0

EPS(Rs) 3.3 3.9 4.5 5.3 6.4

CEPS(Rs) 3.7 4.3 5.0 5.8 7.0

P/E(x) 36.9 31.2 27.1 23.0 19.1

P/BV(x) 22.0 17.1 12.9 10.5 8.6

EV/EBITDA(x) 31.0 26.2 22.8 19.1 15.9

DuPont Analysis

PAT/PBT 0.9 0.9 0.9 0.8 0.9

PBT/PBIT 1.1 1.0 1.1 1.0 1.0

PBIT/Sales 0.1 0.2 0.2 0.2 0.2

Sales/Assets 3.6 3.2 3.3 3.2 3.6

Assets/Net worth 1.3 1.2 1.0 1.0 0.9


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ICICIdi | E i R h

RATING RATIONALEICICIdirect.com endeavours to provide objective opinions and recommendations.ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. currentmarket price and then categorises them as Outperformer, Performer, Hold andUnderperformer. The performance horizon is two years unless specified and the notional targetprice is defined as the analysts' valuation for a stock.Outperformer (OP): 20% or more;Performer (P): Between 10% and20%;Hold (H): +10% return;Underperformer (U): -10% or more;

Pankaj Pandey Head Research [email protected]

ICICIdirect.com Research Desk,ICICI Securities Limited,7th Floor, Akruti Centre Point,MIDC Main Road, Marol Naka,

Andheri (E)Mumbai 400 093

[email protected]

ANALYST CERTIFICATIONWe /I, Sanjay Manyal MBA (Finance), Ritika Shewakramani PGDF research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in thisresearch report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly orindirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICISecurities Inc.

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ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might havereceived compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings,corporate finance, investment banking or other advisory services in a merger or specific transaction. ICICI Securities and affiliates expect to receive compensation from the companiesmentioned in the report within a period of three months following the date of publication of the research report for services in respect of public offerings, corporate finance, investmentbanking or other advisory services in a merger or specific transaction. It is confirmed that Sanjay Manyal MBA (Finance), Ritika Shewakramani research analysts and the authors of thisreport have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on theprofitability of ICICI Securities, which include earnings from Investment Banking and other business.

ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding thepublication of the research report.

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ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may actupon or make use of information contained in the report prior to the publication thereof.

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This report has not been prepared by ICICI Securities, Inc. However, ICICI Securities, Inc. has reviewed the report and, in so far as it includes current or historical information, it is believed tobe reliable, although its accuracy and completeness cannot be guaranteed.

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