Dabur India shares overviews of fmcg personal care companies

This small-sized company will give Dabur a presence in West Asia and North Africa. But, the most critical factor will be the valuation. Recent acquisitions made in the region in a similar category have been valued around two times the sales. With sales of Hobi estimated around Rs 130 crore, the acquisition cost may be around Rs 260 crore, say analysts, adding the company is expected to fund this through debt.

While its debt-to-equity ratio is estimated around 5.2 times, the fructifying of these operations will change it substantially in the current financial year. The debt for the acquisition would only be around 20 per cent of shareholders’ funds and so the impact on the debt-to-equity ratio will not be substantial. The net debt is just about 0.1 times its earnings before interest, tax, depreciation and amortisation, estimate analysts at HSBC. They also estimate that with a net profit margin of around 15 per cent, the acquisition of Hobi will be earnings accretive to the extent of one-two per cent. The risk, however, will be a valuation of more than three times the sales.
source - business standard

Dabur India: Small can be beautiful (updated - 23 July 2010)
The news of an acquisition usually leads to a fall in the share price of the acquirer and a rise in the price of the targeted company’s stock.

The reason: The acquirer company may see a change in its fundamental financial structure, which may affect valuations. However, the case of Dabur India has been different. Its share price rose 1.33 per cent on reports that it is was planning to acquire Turkish personal products company Hobi Kozmetic.

Analysts say the reason is that the acquisition is a relatively smaller one and the outflow will not be financially disruptive for the company. Hobi Kozmetic has footprint in around 30 countries and a presence in hairstyling, haircare, skincare, bath and shower products under brand names Hobby and New Era. Analysts have estimated the company’s revenues at around Rs 130 crore in FY10, just about four per cent of Dabur’s sales.

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Analysts are positive on companies foraying abroad, mainly because margins are better there than in the domestic market, which is intensely competitive. They have re-rated Dabur as an ‘outperformer’ due to a reasonable valuation of 23 times 2011-12 estimated earnings amid positive outlook for the domestic business, followed by the progress on recent international acquisitions.

Its acquisition of Namaste, along with Turkey’s Hobi Kozmetik, its first foreign buy, fits well with the international growth strategy in terms of product portfolio and geographic distribution.

Both companies will contribute significantly to Dabur’s revenues from 201112 and will help increase its international market share from the current 20 per cent of overall sales.

Though the outlook for the domestic business is cautious, Dabur is better placed due to its presence in herbal/ayurvedic products, where competition is relatively less intense. Revenues are likely to improve with launches in health supplement, home care, foods and consumer health divisions.

Analysts expect the company’s top line growth in the second half of 2010-11 to be better than in the first half. The operating profit margin is also expected to be stable, as the rise in raw material costs is likely to be offset by calibrated price incrteases and control over advertising expenses. The stock may surprise on the upside.
source - business standard

Dabur India Ltd (updated - 24 Dec 2010)
The BSE FMCG (fast moving consumer goods) index has registered a 26 per cent gain in 2010, outperforming the Sensex, which has given 14 per cent returns in the period. However, Dabur India lost 38 per cent after a disappointing performance in first half of 2010-11. The consolidated top line grew 17 per cent, while the operating profit margin of about 18.5 was flat, courtesy a challenging domestic market.

But, since the announcement of acquisition of USbased Namaste Laboratories on November 16, the stock has gained about eight per cent, while the FMCG index and the Sensex have remained flat.