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Systematix Research Report
Dabur India Ltd.'s numbers were in-line with our expectations with revenue growth of 7.3% YoY and domestic volume growth of 3% (5% excluding beverages).
Strong growth came from international business which grew 23.6% followed by mid-single digit growth in healthcare and home and personal care segments offset by a 7% decline in food and beverage.
Sharp gross margin expansion of 295 basis points led by softening of inflation and superior segment mix was invested in higher advertising and promotion spends (up 42.6% YoY) and Rs 360 million legal costs on the U.S. entity litigation resulted in Ebitda margin expansion of only 51 bps to 20.6%.
Both HPC and healthcare should grow in high single-digits in FY24 with continued share gains, product innovation and expanding distribution reach. F&B should recover to double-digit growth in FY25 after a soft FY24 with aggressive portfolio expansion in both foods and beverages.
Moderation in inflation and distribution restructuring in international markets should drive double-digit growth there as well.
Dabur India's margins should stay below 20% for FY24 despite a superior segment mix given the expected pick up in A&P spends and the U.S. litigation costs.
We build in 10.3%/14.8% revenue/profit after tax compound annual growth rate over FY23-25E and maintain our 'Hold' rating, with a revised target price of Rs 570 (earlier Rs 590), based on 45 times FY25E earnings, in-line with other HPC peers.
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