Dabur Case Study

22-May-2021
DABUR INDIA LIMITED

CASE STUDY
ABOUT
ABOUT THE
THE COMPANY
COMPANY Case
CASEStudy
STUDY
DHDIndia Ltd. is one of the leading fast moving consumer goods (FMCG) players dealing in consumer care and food products. The
Dabur
company has rich ayurvedic heritage of almost 136 years and is the 4th largest FMCG company in India and a leader in Ayurveda
globally. The company has various brand leaders in different market segments - Dabur Chyawanprash, a health tonic, and Hajmola - a
digestive tablet. Real, launched during 1996- 97, has also successfully become the leader in the market.
Dabur operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The
company has a wide distribution network, with a high penetration in both urban and rural markets. Dabur’s products also have a huge
presence in the overseas markets (contributing 26.6% of revenues) and are available in over 100 countries across the globe. The
company has its manufacturing presence across 9 countries.
Dabur has identified 9 Power Brands – Dabur Chyawanprash, Dabur Honey, Dabur Lal Tail, Dabur Honitus, Dabur Pudin Hara, Dabur
Red Paste, Dabur Amla Hair Oil, Vatika and Real fruit juice – that account for more than 70% of its total sales.
1
ABOUT
ABOUT THE
THE COMPANY
COMPANY Case
CASEStudy
STUDY
SEGMENT BREAK UP INTERNATIONAL BUSINESS GEOGRAPHICAL BREAK UP

DHD (FY21) (FY21)
Dabur’s 12%
Consolidated 28%
Business
14%
International
India Business Others
Business
26.4% 71.3% 2.3%
23% 23%
Home & Personal
Healthcare Foods
Care
Middle East Africa Asia
47.9% 39% 13.1%
Americas Europe
1
GROWTH
ABOUT THE COMPANY Case
CASEStudy
STUDY
DHD SALES GROWTH

In FY21, the revenue grew by 9.9% YoY to ₹9,562 cr.
The India FMCG grew by 14.7% with the volumes
growing by 12.4% YoY, while the international
business reported a 3.4% YoY growth.
Segment wise, the healthcare segment grew by 32%
YoY (led by health supplements), home & personal
care (HPC) grew by 9.5% YoY (led by oral care) while
the food & beverage segment de-grew by 5.7% YoY
(led by beverages).
Among the channels, e-commerce sales delivered 2x
growth during the year led by increased focus on
digital and e-commerce sites due to Covid-19. This
channel contributed ~5%-6% of FY21 revenue.
5 Year CAGR: 3.9%
1
GROWTH
CASEStudy
STUDY
DHD EBITDA GROWTH

In FY21, the EBITDA grew by 11.8% YoY to ₹2,003 cr
led by healthy revenue growth during the year. On
the cost front, the other expenses remained broadly
stable during the year led by various cost
optimization initiatives.
On account of Covid-19, the manufacturing and
supply chain operations were impacted initially,
however with every passing quarter the company
was able to ramp up its activities and hence was able
to meet the demand for its customers.
5 Year CAGR: 5.7%
1
GROWTH
CASEStudy
STUDY
DHD PAT GROWTH

The PAT in FY21 grew by 17.1% YoY to ₹1,696 cr
albeit on a lower base due to an exceptional charge
in FY20 worth of ₹100 cr.
The company would continue to strengthen and
leverage the power brands, expand the distribution
network, digitize the operations, optimize costs and
build organizational capabilities for sustainable and
profitable future growth.
5 Year CAGR: 6.2%
1
GROWTH EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
PROFITABILITY
CASEStudy
STUDY
DHD EBITDA MARGIN

The EBITDA margin continued to remain flat in FY21.
The management had indicated earlier that it would
focus on maintaining the margins with the
‘SAMRIDDHI’ programme at the current juncture
while deploying any incremental profits (₹50 cr of
savings in FY21) into advertisements. Hence, in FY21
there was a sharp ~20% YoY increase in the
advertisement expenses.
During the year, the domestic business witnessed a

~5%-6% raw material inflation spanning across its
entire product portfolio which was partially offset by
way of ~3% price hikes and partially from other cost
savings. On the other hand, the company would
continue to spend on advertisements (~8% of
revenue in FY21) which will help in aiding brand
building and also help to improve the market share.
1
PROFITABILITY
CASEStudy
STUDY
DHD PAT MARGIN

In FY21, the PAT margins would remain stable as
compared to that of FY20. The effective tax rate
during the year was at ~18% while the expected tax
rate in FY22 will be ~21%-22%.
1
PROFITABILITY
CASEStudy
STUDY
DHD ROCE
Dabur had a healthy average ROCE of 31.3% over the
past 9 years. However over the past 4 years, the
ROCE has come down from 34.5% in FY16 to 26.4%
in FY20. In FY21, the ROCE was flat as compared to
that of in FY20.
The company has been incurring higher capital

investments in both brownfield and greenfield
projects along with a new factory which is currently
being built in Assam over the past few years. These
have had an impact on the company’s ROCE over the
past years.
1
PROFITABILITY
CASEStudy
STUDY
DHD ROE
Similar to the ROCE, the company has had a healthy
average ROE of 34% over the past 9 years. In FY21,
the ROE stood lower as compared to FY20.
The ROE has been continuously falling over the years

on account of deceleration in net profit growth.
1
PROFITABILITY EDGE METER: 4
EFFICIENCY
CASEStudy
STUDY
DHD CASH FLOWS

Dabur has a very healthy and strong cash flow from
operations (CFO) profile over the years. In FY21, the
CFO stood at ~₹2,115 cr, which was 31% higher on a
YoY basis.
Cash flow from investing activities was an outflow of

~₹1,406 cr. During the year, Dabur spent ~₹311 cr on
its capex activities.
Cash flow from financing activities outflows stood at

~₹613 cr in FY21.
Dabur has been leveraging the new-age channels like

ecommerce, cash and carry and modern trade which
is enabling them to make leaner operations, thus
aiding the cash flows of the company.
1
EFFICIENCY
CASEStudy
STUDY
WORKING
DHD CAPITAL CYCLE
The working capital cycle of the company has
improved significantly over the past 9 years. Initially
the working capital used to be tied up for around 35
days and in FY20 it came down to just 2 days.
This had been mainly due to extended payable days

along with a control over receivable and inventory
days by prudent collection system driven by online
payments and selective incentives for early payments
along with planned stock pile up over these years.
1
EFFICIENCY
CASEStudy
STUDY
DHD FREE CASH FLOW

Dabur has had a healthy and a positive FCF per share
over the years. In FY20, the FCF/share was lower at
₹6.75 due to higher net CAPEX during the period.
Over the past 5 years, the company has allocated
~3%-5% of revenues on its CAPEX activities.
Dabur would invest ~₹550 cr in next 4-5 years to set

up a Greenfield facility in central India to cater across
all the regions. This would primarily cater to the
Healthcare, Chyawanprash and HPC business. There
has been an increase in the penetration of
healthcare in the country and hence, the
management is preparing itself by augmenting the
capacity in order to meet the demand.
1
EFFICIENCY
CASEStudy
STUDY
ASSET
DHD TURNOVER RATIO
Dabur has had a stable asset turnover ratio over the
past few years at around 1.09x. The sales growth
during the period FY16 to FY17 were impacted due
to factors such as demonetization, currency
devaluation, below average rainfall impacting the
rural sector and hence slowdown in the FMCG
industry along with other headwinds in the
international markets such as geo-political issues and
currency volatility. However, the industry slowly
started reviving from FY18 onwards which is
reflected in the improvement of the topline growth.
1
EFFICIENCY EDGE METER: 3
SOLVENCY
CASEStudy
STUDY
DHD DEBT TO EQUITY

Dabur has a low debt-equity ratio which has reduced
from 0.72x in FY12 to ~0.06x in FY21.
Similar to that of FY20, the company did not have

any substantial long term debt. ₹134.13 cr worth of
non-current borrowings cater to the long term
maturities of lease liabilities. The remaining short
term borrowings formed as a part of the working
capital loans.
1
SOLVENCY
CASEStudy
STUDY
INTEREST
DHD COVERAGE RATIO
The interest coverage ratio of Dabur has also been
fairly stable over the past 5 years. Overall the EBIT is
healthy enough to cover up the interest obligations
comfortably.
1
SOLVENCY
CASEStudy
STUDY
DHD CURRENT RATIO

Dabur has had a comfortable current ratio over the
years. In FY21, the current ratio stood at ~1.63x.
During the year, higher trade payables (~65%) led to

an increase in the total current liabilities, however
the current assets were lower. Overall the company
has a comfortable mix of short term liabilities and
assets.
1
SOLVENCY EDGE METER: 5
VALUATION
CASEStudy
STUDY
DHD PE RATIO
At the current market price of ₹537.5, Dabur is
trading at a PE of 56.01x based on TTM based EPS.
Any threat to the market share in the healthcare

segment due to the competition would be a key risk
to the company’s valuation.
1
VALUATION
CASEStudy
STUDY
DHD DIVIDEND YIELD

For the year FY21, the company has declared an
equity dividend of 475% amounting to ₹4.75 per
share.
Over the past 5 years, the company has had a

dividend payout of ~43%. In FY21, the dividend
payout stood at ~68%.
1
VALUATION
CASEStudy
STUDY
DHDTECHNICAL ANALYSIS
Dabur India has been in a steady uptrend since the
last few years. The stock had been consolidating
between ₹360 and ₹480 between 2018 and 2020. It
was able to sustain ₹480 since August 2020 and has
seen a high of ₹581 recently.
The trading and delivery volume activity has

increased significantly since March 2020 and the
stock has been able to sustain above ₹500.
Investors can accumulate the stock between ₹500

and ₹520. On the upside a move beyond ₹600 will be
required for further upmove.
1
VALUATION EDGE METER: 4
QUALITY
CASEStudy
STUDY
DHD MANAGEMENT
The management of Dabur had shown nimble-
footedness and agility during the tough pandemic
period by responding to the changing dynamics in
the marketplace with a more streamlined portfolio
and refreshed positioning to meet the emerging
needs of the customers.
The management is keen to enhance the popularity

of Ayurveda and make it mainstream which includes
launch of contemporary formats, enhanced
distribution and visibility and promotion on digital
media.
The Power Brand strategy has been one of the key

pillars of growth. Dabur is putting disproportionate
investments behind these brands to improve
visibility, enhance distribution and drive innovation.
1
QUALITY
CASEStudy
STUDY
SHAREHOLDING
DHD PATTERN
The promoter group shareholding was marginally
lower at 67.38% stake in the company.
FII shareholding increased to 19.77% while DII

shareholding decreased to 5.34% in March 2021.
Non-institution shareholding decreased to 7.51%.
Top public shareholding:-
First State Investments ICVC 1.37%

ICICI Pru Life Insurance 1.18%
1
QUALITY
CASEStudy
STUDY
DHD SECTOR POTENTIAL

• The Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy. There are 3 main segments of the
sector: 1) Household and personal care (accounts ~50% of the sector) 2) Healthcare (accounts ~31% of the sector), and 3) Food &
beverages (accounts ~19% of the sector). According to the IBEF, the sector is expected to grow to US$ 220 billion by 2025 from
US$ 110 billion in 2020.
• The FMCG sector faced a stagflation in growth over the last few years due to demonetization and GST implementation along with
broader economic slowdown. The pace of innovation has recently ramped up in FY19 and FY20 expanding into newer categories
and broadening the product portfolio.
• The spread of the COVID-19 pandemic has led to a sharper resurgence in the consumer interest, awareness and demand for
Ayurvedic therapies and medicines. Increased focus on preventive healthcare and personal hygiene has led to an increase in the
demand for the Ayurveda based solutions.
• Factors such as increasing popularity of natural and herbal medicines, rising health concerns and awareness about the side-effects
of western medicines is driving the consumer preference for Ayurvedic products in the country. Furthermore, the distribution
network of ayurvedic products have improved significantly, increasing the accessibility of these products across both urban and
rural regions.
1
QUALITY
CASEStudy
STUDY
COMPETITIVE
DHD LANDSCAPE
Dabur has been facing competition from a very long
time. With new players entering the market,
innovative product launches, high distribution reach
and brand awareness are a few of the areas that the
company has been continuously working on.
Apart from the hair oil segment, other spaces have

relatively low competitive intensity. Hence, the
management would continue to work on innovation,
advertisements, strategic pricing and increasing
penetration through e-commerce channels in order
to gain the market share.
1
QUALITY
CASEStudy
STUDY
DHD FUTURE OUTLOOK

• Focus on power brands – The company would continue to focus on the power brands by investing behind different brands in order
to improve visibility, increase distribution and pace of innovation by launching new product and variants. Hence, the company has
also increased its advertisement costs behind these brands. Also, special focus is put upon the digital channel (~5%-6% of sales in
FY21) with each of these brands in order to improve the connect with the millennials and Gen-Z.
• Healthcare segment to be the key growth driver – Dabur is the world’s largest ayurvedic and natural healthcare company. With
growing awareness of the ayurvedic products and its health benefits, the company is well poised to benefit from the development.
The company would continue to innovate new products and launch a string of Ayurveda-based products in modern, ready-to-use
formats. Being the most margin accretive segment, Dabur wants to structurally change the skew of its product portfolio to a
greater prominence to healthcare segment from home and personal category segment.
• Expand international footprint – During FY21, the international business registered a growth of 3.4% led by the Bangladesh
market. The management believes that within its international business portfolio, Bangladesh has a huge scope of growth however
due to the pandemic lockdown, the market was hit in April and May. The company is strengthening its footprint and expanding its
distribution network in order to grow profitability in the geography. Hence, the management is confident of double digit growth of
the international business.
1
QUALITY
CASEStudy
STUDY
DHD FUTURE OUTLOOK

• Expansion plans – The management has stated that the capex plans would remain range bound within ₹250 cr-₹300 cr in the
medium term. In the next 4-5 years, the company has plans to invest ~₹550 cr. It would primarily cater to the healthcare,
Chyawanprash and HPC business. There has been an increase in the penetration of healthcare in the country and hence, the
management is preparing itself by augmenting the capacity in order to meet the demand.
• Expand its direct reach - Dabur aims to increase its direct reach to 1.4 million by the end of next year (~1.3 million outlets as of
FY21). In the rural sector, the company has set a target to reach 80,000 villages by FY24E (~60,000 villages as of FY21). Along with
these, the company has been investing into e-commerce and modern trade channels for deeper penetration into various
geographies. For inorganic investments the company continues to pay special focus on ROI and synergies before making any
investment decision.
1
QUALITY EDGE METER: 4
FINAL
ABOUTEDGE
THE MATRIX
COMPANY Case
CASEStudy
STUDY
DHD
Edge Meter Aspects Grade
Growth 3
Profitability 4
Efficiency 3
Solvency 5
Valuation 4
Quality 4
TOTAL 23
The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
CASEStudy
STUDY
DHD
THANK YOU
This document and the process of identifying the potential of a company has been produced only for learning purposes. Since
equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.
www.stockedge.com
1
CASEStudy
STUDY
DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one per cent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates has, any other material conflict of interest at the time of publication of the research report or at the time
of public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have managed or co-managed public offering of securities for the subject company in the past twelve
months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation for investment banking or merchant banking or brokerage services from
the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation for products or services other than investment banking or merchant
banking or brokerage services from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation or other benefits from the subject Company or third party in connection
with the research report.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates was a client during twelve months preceding the date of distribution of the research report.
Neither Kredent Infoedge P Ltd. nor any of its associates has served as an officer, director or employee of the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates has been engaged in Market making for the subject company.
Kredent Infoedge P Ltd shall provide all other disclosures in research report and public appearance as specified by the Board under any other regulations.

Dabur Case Study

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Dabur Case Study

Uploaded by

Copyright:

Available Formats

22-May-2021

DABUR INDIA LIMITED

SEGMENT BREAK UP INTERNATIONAL BUSINESS GEOGRAPHICAL BREAK UP

DHD SALES GROWTH

5 Year CAGR: 3.9%

DHD EBITDA GROWTH

5 Year CAGR: 5.7%

DHD PAT GROWTH

5 Year CAGR: 6.2%

DHD EBITDA MARGIN

During the year, the domestic business witnessed a

DHD PAT MARGIN

The company has been incurring higher capital

The ROE has been continuously falling over the years

DHD CASH FLOWS

Cash flow from investing activities was an outflow of

Cash flow from financing activities outflows stood at

Dabur has been leveraging the new-age channels like

This had been mainly due to extended payable days

DHD FREE CASH FLOW

Dabur would invest ~₹550 cr in next 4-5 years to set

DHD DEBT TO EQUITY

Similar to that of FY20, the company did not have

DHD CURRENT RATIO

During the year, higher trade payables (~65%) led to

Any threat to the market share in the healthcare

DHD DIVIDEND YIELD

Over the past 5 years, the company has had a

The trading and delivery volume activity has

Investors can accumulate the stock between ₹500

The management is keen to enhance the popularity

The Power Brand strategy has been one of the key

FII shareholding increased to 19.77% while DII

Non-institution shareholding decreased to 7.51%.

Top public shareholding:-

First State Investments ICVC 1.37%

DHD SECTOR POTENTIAL

Apart from the hair oil segment, other spaces have

DHD FUTURE OUTLOOK

DHD FUTURE OUTLOOK

You might also like