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Informist, Monday, Jan. 27, 2025

By Anand JC

MUMBAI - Dabur India Ltd.'s December quarter volume growth is expected to be flattish owing to an overall sluggish demand environment coupled with a late, mild winter season, as per analysts' estimates. While the performance of its domestic business, as stated by the company in its quarterly update, may not have evoked much enthusiasm amongst analysts, they are optimistic about its international business.

Dabur India is expected to report a consolidated net profit of INR 5.07 billion, as per the mean of estimates by 16 analysts collated by Informist. The company's bottom line may fall 1.4% on year, but could rise 19.3% sequentially. Dabur India's continued advertising and promotion expenditure, despite subdued volume growth, may have a bearing on its profitability, HDFC Securities said in a note.

Dabur India may report consolidated sales of INR 33.54 billion for the December quarter, up 3% on year, according to the average of 16 analyst estimates. Dabur India itself expects low-single-digit growth for the December quarter, as per its quarterly performance update released Jan. 3.

The revenue of the fast moving consumer goods major was likely impacted by the weak performance of its winter portfolio, which contributes 30-35% to its total revenue. In addition, hygiene corrections in distribution infrastructure and increased competitive intensity will also weigh on Dabur India's revenue growth, HDFC Securities said.

While the performance of Dabur India's home and personal care segment in the December quarter was likely sturdy, its healthcare, food and beverages segment is expected to have had a more difficult time. According to Motilal Oswal Financial Services, agricultural commodities witnessed year-on-year inflation for the third consecutive quarter, which took a toll on Dabur India. This uptick in input prices coincides with uneven demand trends in India, as rural continues to outpace weak urban demand.

The company's India FMCG business volume growth is projected to be flat in the December quarter. Dabur India volumes had declined 7.5% on year in the September quarter, and had grown 4% in Oct-Dec. The five-year compound annual growth rate for Dabur India's volume growth is 4.4%, as per Nirmal Bang Equities.

Brokerages expect Dabur India's Badshah Masala and culinary business 'Homemade' to report strong double-digit growth in the December quarter. Analysts anticipate the company's beverages business will be impacted by higher competition, resulting in weaker sales.

Dabur India is expected to report consolidated earnings before interest, taxes, depreciation, and amortisation of INR 6.66 billion in the December quarter, according to an average of 14 analyst estimates. Dabur India's operating profit is likely to fall 16.2% on year and 5.4% sequentially. Axis Securities expects Dabur's EBITDA growth to remain flat on account of higher operating expenditure.

The FMCG major hiked prices and undertook cost efficiency initiatives during the quarter to mitigate inflationary pressures, Nirmal Bang said. However, these measures likely affected its EBITDA margin, which the brokerage firm expects to fall 90 basis points on year to 19.6%.

Dabur India's EBITDA margin profile, which has historically been 20-21%, was adversely impacted in the previous two quarters due to weakness in its high-margin healthcare business, according to Emkay Global Financial Services.

The company's international business, which accounts for 24.8% of its consolidated sales, will report double-digit growth in its international business on a constant currency basis, Dabur India said. This will be led by good momentum in West Asia, North Africa, Egypt, Bangladesh and US business, Dabur added. The company's international business includes its organic overseas business, the acquired entities of Hobi Group and Namaste Laboratories LLC.

Back home, Dabur India's general trade continues to be under pressure. "While general trade was still under pressure, alternative channels like modern trade, e-commerce, and quick commerce continued to post strong growth," Dabur India said in its quarterly performance update.

Given the uneven demand trends, analysts have turned slightly bearish on the FMCG sector in recent months. According to JM Financial, in the consumer staples sector, the stock figures amongst the 'top avoids' for Oct-Dec, alongside Asian Paints.

On Monday, shares of the FMCG major closed at INR 523.85 on the National Stock Exchange, up 0.4%. Dabur India's September quarter financials were disclosed on Oct. 30. Between then and Monday, shares of the company have contracted roughly 4%.

Dabur India's board is scheduled to meet on Thursday to consider the company's December quarter earnings.

Following are the Oct-Dec earnings estimates for Dabur India Ltd. based on reports from 16 brokerage firms in descending order on the estimate of net profit:

End

Edited by Ashish Shirke

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