Dabur Q1 Results Review - Growth Coming Back Gradually; Margin Normalisation To Take More Time: Systematix

Systematix Research Report

Dabur India Ltd.’s numbers were in-line with our expectations with revenue growth of 10.9% YoY, domestic volume growth of 3%, flat Ebitda margin at 19.3% and Adjusted profit after tax growth of 3.7% YoY.

Key growth drivers were double-digit growth in healthcare and home and personal care business (unseasonal rains and high base impacted beverages) and 20.6% constant currency growth in international business, gross margin expansion led by softening of inflation and superior segment mix was invested in higher advertising and promotion spends. Key quarter takeaways are:

1. Dabur's India revenue (72.8% of total sales) grew at 8%, with international revenue expanding at 20.6% CC,

2. cross margin expansion of 74 bps YoY to 46.6% was led by lowering of raw material cost and lower beverage contribution, however consolidated Ebitda margin remained flat at 19.3%, led by higher ad spends,

3. healthcare revenue grew 10% YoY with market share gains across sub categories,

4. home and personal care revenue was up 11%, led by market share gains in home, oral, skin and hair care categories,

5. food and beverage revenue remained flat for the quarter as beverages were impacted due to unseasonal rains in North and West,

6. International business (~23.4% total sales) delivered 20.6% revenue growth in constant currency terms,

7. strong rural recovery at 8% ahead of market growth of 4%.

Both home and personal care and healthcare should grow close to double digits in FY24 with continued share gains, product innovation and expanding distribution reach. F&B should grow close to mid-single digit growth with aggressive portfolio expansion in both foods and beverages partially offset by muted peak season beverage sales.

Stable currency and distribution restructuring in international markets should drive double-digit growth there as well.

Dabur' margins should stay below 20% for FY24 as well despite a superior segment mix given high inflation in foods basket and expected pick up in advertising and promotion spends.

We now build in marginally better growth and see 10.5%/16.9% revenue/profit after tax compound annual growth rate over FY23-25E, which is in-line with peers.

We maintain our 'Hold' rating, with a revised target price of Rs 590 (earlier Rs 578), based on 45 times FY25E earnings.

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