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Motilal Oswal Report
Dabur India Ltd. achieved steady revenue and double-digit operating profit growth, with improvement in gross margins led by moderating inflation despite 43% increase in Ad-spends.
While there has been a sequential improvement noted in urban markets, the rural market is still lagging behind. However, there are promising signs of recovery in rural sentiments.
Digestive and home care portfolio saw strong double-digit growth, while beverages witnessed a decline due to uneven distribution of rainfall and a shift in the festive season. Leveraging synergies within the healthcare portfolio, the company expects to achieve double-digit consolidated sales growth in FY24.
The success of Badshah masala (grew 16.4%) is contributing significantly to the growth momentum of the food portfolio and food business including Badshah is on track to achieve ~Rs 5 billion annual revenue.
Legal proceedings related to the hair relaxer industry resulted in a legal charge of ~Rs 360 million for Dabur's U.S.-based step-down subsidiary, Namaste LLC, during the quarter.
Going forward, the anticipated legal expenses are expected to range between Rs 200 million and Rs 220 million per quarter.
Dabur has demonstrated a faster rural recovery compared to the industry, with nearly half of its domestic sales originating from rural markets. Strengthening distribution infrastructure and fostering innovation are expected to further boost the company's growth momentum.
We reiterate our 'Buy' rating on the stock with a target price of Rs 0660 at 50 times FY25E earnings per share.
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