Dabur India Q3 Review - Sluggish Volume, Margin Performance; Better Pricing, Mix To Drive Recovery: Systematix

Systematix Research Report

Dabur India Ltd. reported a muted set of numbers with revenue growth of 3.4% YoY, domestic volume decline of 3%, margin decline of 130 basis points and profit after tax decline of 5.4% YoY.

A deterioration in market conditions in key states of Uttar Pradesh and Bihar, high base and inflation impact were the key factors. Key quarter takeaways are:

1. Dabur's India revenue (71.5% of Q3 total sales) grew at 3.3%, with international revenue expanding at 5.1%,

2. consolidated Ebitda margin dipped 130 bps, with a 215 bps cut in ad spends (from 8.1% to 5.9%) partially offsetting the 280 bps decline in gross margins (combination of inferior mix and price hikes lagging inflation),

3. healthcare revenue (39.7% of Q3 domestic sales) grew by 3% YoY, recording 8.4% three-year compound annual growth rate, with market share gains in health supplements,

4. home and personal care (45.6% of Q3 sales) revenue was up 2.2% YoY, recording 8.7% three-year CAGR, led by market share gains in home, oral and hair care categories,

5. food and beverage (14.8% of Q3) revenue grew at 6.4% YoY and 15.2% three-year CAGR, led by share gains in juices,

6. International business (~25.5% of Q3 total sales) delivered 14% revenue growth in constant currency terms,

7. e-commerce sales grew 40% increasing salience to 9%,

8. consolidated gross margin contracted 280 bps YoY and Ebitda margin by 130 bps YoY to 45.5% and 20% given inferior category and pack mix, and

9. central region (UP and Bihar) saw decline due to insufficient rainfall, delay in winter and adverse sentiment.

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