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Informist, Friday, Jan. 3, 2025

MUMBAI – Nuvama Institutional Equities said Dabur India Ltd.'s revenue and operating profit projections for the December quarter were below its expectations, and that it expects the stock to be under selling pressure in the near term.

In a quarterly update after-market hours Friday, Dabur India said it expects consolidated revenue for the December quarter to rise in low single digit and operating profit to be flat. In view of this, the brokerage now expects the consolidated revenue for the quarter to rise 2% against earlier expectations of a 4% rise. The brokerage had expected the earnings before interest, tax, depreciation, and amortisation would rise by 3%.

The company's domestic volume growth is likely to be flat on year due to pressure on its general trade channel, while a late and mild winter has affected its home and personal care segment, Nuvama said. Moreover, Dabur's juice business is facing tough competition from the rising presence of Campa Cola. The brokerage expects Dabur's international business to grow 10% on year in constant currency terms led by West Asia and North Africa, Egypt, Bangladesh and the US. But it expects the international business to register a slower growth of about 5% in rupee terms due to the impact of exchange rates.

Nuvama expects Dabur's home and personal care segment to grow 5–7% but the growth of its healthcare segment to be flat on year. The beverages portfolio is likely to experience muted performance. Nuvama expects demand trends to remain benign sequentially as a delayed winter hurt the performance of Dabur's winter care portfolio.

Despite facing inflationary pressures in certain segments, Dabur mitigated these challenges through tactical price increases and cost control, Nuvama said. The brokerage expects price hikes of merely 1% in Oct-Dec. Price hikes taken in light of ongoing food inflation across the portfolio will be offset by price cuts in the beverages business, it said.

Gross margin is expected to expand by 119 basis points on year to 49.8%, but EBITDA margin is likely to decline by 40 bps on year to 20.1%. The brokerage has retained its 'buy' rating on the stock for a target price of INR 650. "...we expect a gradual recovery in FMCG growth in tandem with improved macroeconomic indicators," the brokerage said.

Dabur India had reported a consolidated net profit of INR 4.25 billion for the September quarter on revenue of INR 30.29 billion. On Friday, shares of the company closed at INR 524.90 on the National Stock Exchange, up 2.3%.  End

Reported by Gopika Balasubramanium

Edited by Ashish Shirke

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