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Axis Securities Report
Dabur India Ltd.'s consolidated revenue grew 6.4% YoY to Rs 2,678 crore, with its domestic business growing by 4.7% (flat volume growth) on account of weak rural demand and mixed performance in home and personal care and health care.
International business grew 9.6% YoY (in constant currency terms). The management highlighted that the demand slump in rural areas has bottomed out and is now seeing initial signs of recovery with secondary sales growing at a double-digit rate.
Gross margins which stood at 45.8% (down 163bps YoY). Ebitda margins declined 271 bps YoY to 15.3% owing to an unfavorable product mix (high salience of low margin food and beverage), high promotions, subdued international margins and higher ad-spends.
Profit after tax came in at Rs 301 cr, up 2% YoY. The company announced a final dividend of Rs 2.7/share, taking the total dividend to Rs 5.2/share for FY23.
Outlook:
FMCG companies have been battling with a rural slowdown for the last few quarters on account of high consumer inflation eating their wallet share. This, in turn, has been impacting their overall volume growth. However, demand is likely to recover in the coming quarters led by softening of core inflation, an increase in government spending, and an increase in urban remittances.
Furthermore, softening of raw material inflation will provide much-needed support to margins. Barring short-term margin pressure, we continue to believe in Dabur's long-term growth story and like the management's-
Focus on strong execution – market share gains, go-to-market initiatives, deepening rural penetration,
appointment of professionals to head separate business divisions, eg. Recent appointment of Ex-CEO of Himalaya Mr. Philipe Haydon to head Health care division; and
Strong management bandwidth drives our confidence in the long-term growth prospects of the company.
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