Recommendation From FMCG Sector
This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.
DABUR INDIA LTD.:TAKING THE FMCG SECTOR BY STORM.
HERE IS WHY
✓Strong brand proposition
✓Robust cash position
✓Continuous focus on innovation
Established in 1884, Dabur India is among the top four FMCG companies in India. With its market capitalisation crossing Rs1 lakh crore, this FMCG giant has built a strong brand and trust in India. It also has a strong global presence since its international business contributes nearly 26 per cent to the revenues. The company has 20 world-class manufacturing units catering to the rising demand for its products along with a robust distribution network in India, covering approximately 69 lakh outlets. Its product portfolio covers health supplements, digestives, hair care, oral care, skin care, home care and foods. A significant portion of these products consists of natural and ayurvedic sources.
The company reported net sales of Rs9,546.6 crore in FY21 compared to Rs8,684.64 crore in FY20 – growth of nearly 9.92 per cent. Its EBIDTA stood at Rs2,327.97 crore in FY21 as against Rs2,097.64 crore in the previous year with growth of over 10.98 per cent. Also, PAT saw a growth of 17.12 per cent, an increase from Rs1,447.93 crore to Rs1,695.96 crore from FY20 to FY21, respectively. The company has strong cash balance with a growth of nearly 31 per cent, as is evident from operating activities’ cash flows increasing from Rs1,613.6 crore in FY20 to Rs2,114.67 crore in FY21. Net sales for the quarter ended June 2021 amounted to Rs2,611.54 crore, a growth of 11.76 per cent on QoQ basis and 31.9 per cent on YoY basis.
The EBITDA, exclusive of other income, was Rs552.03 crore, which saw growth of 24.76 per cent QoQ and nearly 32.5 per cent YoY. The net profit stood at Rs438.37 crore, a growth of 16 per cent QoQ and 28.45 per cent YoY. The growth was mainly driven by its healthcare portfolio which saw an increase of 30 per cent in the quarter, marking consecutive growth for the last five quarters. While commanding a strong urban presence, Dabur India continues to focus and strengthen its hold in rural areas too. In order to increase the access and availabil-ity of its products, it has enhanced village coverage by 15 per cent in the quarter.
The company’s international business recorded robust growth of 34 per cent in constant currency terms. In FY21, the hygiene segment contributed nearly 47.9 per cent to the revenues followed by healthcare with 39 per cent and food and beverages by 13.1 per cent. The health-care portfolio witnessed the highest growth of 31.9 per cent. Its power brands, Dabur Chawanprash and Dabur Honey, added Rs500 crore in revenues. Its toothpaste brand, Dabur Red, alone added Rs1,000 crore in FY21. Overall, the power brands witnessed growth of 19.2 per cent in FY21. It plans to further capitalise on power brands through digitalisation by connecting with the new generation of consumers.
Driven by technology, research and innovation, it launched 50+ new products in FY21. On the return front, Dabur India has not disappointed its stakeholders. The ROE and ROCE for the fiscal 2021 stood at 24.14 per cent and 27.29 per cent, respectively. It has significantly low debt in its books with debt-to-equity at just 0.07. It has seen improvement in collections since debtor days have improved from 33.9 to 21.47 days. Overall, the company is witnessing growth across various verticals. The management is all set to capitalise on the opportunities and lead the company to greater heights. Considering all these factors, we recommend our reader-inves-tors to BUY the scrip.
