First case study: Dabur India Limited.
Earnings growth: 19% CAGR for 25 years (From 1995-2020)
Returns to shareholders ( not considered the dividends) 20% CAGR.
PE in 1995: 42
PE in 2020: 52.
So, the return comes from earnings growth and the contribution of PE is... (1/n)
Earnings growth: 19% CAGR for 25 years (From 1995-2020)
Returns to shareholders ( not considered the dividends) 20% CAGR.
PE in 1995: 42
PE in 2020: 52.
So, the return comes from earnings growth and the contribution of PE is... (1/n)
https://twitter.com/Vivek_Investor/status/1485895281812320256
Negligible.
What were the growth triggers?
19% CAGR for 25 years is not a joke.
When I studied the last 20 years financials I found a few interesting facts.
Two big triggers for the earnings growth:
1. It spins off the pharmaceutical division (mainly it was focused on. 2/n
What were the growth triggers?
19% CAGR for 25 years is not a joke.
When I studied the last 20 years financials I found a few interesting facts.
Two big triggers for the earnings growth:
1. It spins off the pharmaceutical division (mainly it was focused on. 2/n
Oncology) during 2003.
2. Acquisition of Balsara group approximately 1.4X the sales in 2004.
By acquiring the Balsara it got some valuable brands like Balsara, Babool, Promise, Meswak, Odonil, Odomos, Odopic, Sanifresh.
So, everything changed after 2003 & 2004.
(3/n)
2. Acquisition of Balsara group approximately 1.4X the sales in 2004.
By acquiring the Balsara it got some valuable brands like Balsara, Babool, Promise, Meswak, Odonil, Odomos, Odopic, Sanifresh.
So, everything changed after 2003 & 2004.
(3/n)
Before the spin-off & acquisition:
The average ROCE was around 15-16% for 7-8 years.
The average operating margins were around 10-11%
After the spin-off and acquisitions:
Operating margins grew consistently for the next 7-8 years from 12% to 20%
ROCE expands (4/n)
The average ROCE was around 15-16% for 7-8 years.
The average operating margins were around 10-11%
After the spin-off and acquisitions:
Operating margins grew consistently for the next 7-8 years from 12% to 20%
ROCE expands (4/n)
From 16% to 40% (average)
Topline (revenue) grew 18% CAGR for the next 7 years & earnings grew at 27% CAGR.
So, if we consider 1995 as the base year, 2003 & 2004 were phenomenal years for Dabur, we can call it a "transformation" period.
Now look at the last 9 years (5/n)
Topline (revenue) grew 18% CAGR for the next 7 years & earnings grew at 27% CAGR.
So, if we consider 1995 as the base year, 2003 & 2004 were phenomenal years for Dabur, we can call it a "transformation" period.
Now look at the last 9 years (5/n)
Data.
From 2012-21:
Sales growth: 7% CAGR.
Earnings growth: 11% CAGR.
Operating margins: 18-20%
Final observations:
• 19% growth looks impressive but to achieve such kind of growth for the next two decades will be difficult ( I'm not saying impossible)
(6/n)
From 2012-21:
Sales growth: 7% CAGR.
Earnings growth: 11% CAGR.
Operating margins: 18-20%
Final observations:
• 19% growth looks impressive but to achieve such kind of growth for the next two decades will be difficult ( I'm not saying impossible)
(6/n)
After a certain point of time, operating margins expansion will be difficult.
Yes, it can raise the price because of pricing power, and value-added products can increase the volume growth to a certain extent but 18-20% growth would be difficult considering its size (7/n)
Yes, it can raise the price because of pricing power, and value-added products can increase the volume growth to a certain extent but 18-20% growth would be difficult considering its size (7/n)
Such kind of growth is possible if they enter into the overseas markets or aggressively expand the product line.
I'm not talking about the valuation here.
Note: This is not a recommendation to buy/sell.
End.
#EQTlearnings
I'm not talking about the valuation here.
Note: This is not a recommendation to buy/sell.
End.
#EQTlearnings
The returns from the stock between 2004-2012 were phenomenal & it was in line with earnings growth, but the last 10 years returns mainly comes from PE expansion ( declining interest rates might be one of the reasons for that)
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