HUL, Dabur India results on expected lines

In a climate of consumption blues, Dabur India has closed its fourth quarter with strong volume-led growth in its key categories involving health supplements, digestives, shampoos, toothpastes, food and homecare. This proves that the company has been able to claw through an otherwise slow business environment.

Net sales for the fourth quarter of 2013/14 recorded a 15.5 per cent growth to Rs 1,769.02 crore, against Rs 1,531.09 crore in the same quarter last year. Net profit surged 17.3 per cent to Rs 235.29 crore, as against Rs 200.55 crore in the corresponding period last year.

With this, Dabur has closed 2013/14 with a 15.1 per cent growth in sales at Rs 7073.21 crore, up from Rs 6,146.38 crore a year earlier. Net profit for the entire year grew by 19.7 per cent to Rs 913.92 crore, from Rs 763.42 crore a year earlier.

It is interesting to note, that while the company's traditional portfolio grew, it has experimented even when it came to categories that depended on the consumer's discretionary spend such as fruit juices.

It launched a new category called SupaFruits with two variants to include strawberry and plum and goji berry combined with pink guava. It also launched variants with ActivFibre. In a bid to tap into the growing need for health it launched packaged coconut water under the Real brand where a 200 ml bottle was priced at Rs 35. Not just that, it dared to enter the contentious milk category too with packaged milkshakes of 200 ml were priced at Rs 25.

In the personal care space, the company has launched the first olive-oil variant under the Vatika brand where a 100 ml reference was priced at Rs 60. It opened up the skin bleach market for men, by launching a range under its OxyLife range.

However, analysts are not surprised: "Dabur's 4QFY14 revenues are modestly ahead of our expectations. Most segments have performed strongly, while hair care continued to register weak performance (continued industry weakness in hair oils). The company has met our profit estimates even as advertising and promotions expenses have come in ahead of our expectations (+40 bps y/y growth in A&P expenses as % sales). We view the results positively, as: 1/ quality of earnings remains strong, and 2/ Dabur continues to outperform FMCG industry growth," notes Ritwik Rai, FMCG Analyst, Kotak Securities.

It is true that the bellwether stock, Hindustan Unilever, has maintained its performance and the fast moving consumer good behemoth has closed 2013-14 fiscal with 9 per cent growth in net sales to Rs 27,408 crore compared to Rs 25,206 crore last year.

Its net profit grew by 2 per cent to Rs 3,867 crore compared to Rs 3797 crore last year. For the fourth quarter, ending this March, its sales stood at Rs 6939 crore compared to previous period last year at Rs 6367 crore.

Its underlying volume growth, however, was barely maintained at 3 per cent growth, but this was done by shoring up its operating margin that grew by 30 basis points.

"The results are good and on expected lines. But we do not expect the consumption story to change radically in the next two quarters," said N. Srinivasan, Research Analyst, Angel Broking.

The reason for the subdued performance of the FMCG stocks is also the high valuations and also fears of a poor monsoon this year that could significantly affect the cost structure of these players. That is not all, rural demand that had been a big source of growth is also beginning to taper off.