Chyawanprash-maker Dabur India's share price slipped over one percent in trade on January 31, after the FMCG player reported muted earnings for the quarter ended December 31, 2024. Brokerages trimmed their target prices on Dabur India shares given the subdued urban demand and a consecutive weak performance by beverage business.
Dabur India reported a net profit of Rs 522.38 crore for the quarter which ended on December 31. This marks an increase of nearly 2 percent from the Rs 514.22 crore net profit reported in Q3 of previous financial year.
Dabur reported a revenue of Rs 3,355.25 crore, higher by 3 percent on-year from the Rs 3,255.06 crore revenue reported in the corresponding quarter of FY24.
Dabur India's domestic business value and volumes grew mere 1.7 percent and 1.2 percent on-year, respectively, affected by delayed onset of winters hurting winter care portfolio. The winter portfolio usually has 30–35 percent salience in Q3.
The share price of the FMCG firm fell in the morning session to quote Rs 525.85 on the NSE, down 1.5 percent.
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Segment Performance
Dabur India's domestic business grew 1.7 percent compared to a mid-single-digit target, with 1.2 percent volume growth that was aided by promotions. Home and personal care, half of the domestic business, saw 6 percent volume-driven growth, while healthcare declined 1 percent on-year as a result of a weak winter.
While Foods grew 30 percent, beverages fell 10 percent YoY due to pressure in Juices & Nectars. The company gained market share in 95 percent of its portfolio. International growth was 18.5 percent in constant currency terms.
Beverages
The firm's beverages portfolio remained under constant stress given the rising competition in the cola spaces and pressure on demand. The segment saw a decline of 10.3 percent as a result of subdued festive demand. While the fruit drinks and Active range saw high single digit growth, the juices and nectar range slipped nine percent.
The CEO Mohit Malhotra shared that Dabur India will shift its communications to focus on pitting juices against cola, offer a new economical range, and also offer extra margins to distributors, who will be incentivized to push Dabur's juices.
Toothpaste
Dabur's oral care portfolio recorded a growth of 9.1 percent during the quarter, driven by a strong Red franchise and Meswak, making it the second player largest player in the oral care space in India.
There are gaps in our portfolio which we are in the process of plugging, said the management, adding, "We've gained market share because we've grown ahead of the category in the recent terms and we gained roughly around 5 to 6 basis points market share. We feel there's a huge headroom which is available in terms of us taking shares from the market leader."
Rural and urban divide
Compared to the urban demand, rural demand is growing sharply, leading to consistent outperformance. The consumption from tier-3 towns and villages remains steady, with the a 140 basis points divide against urban demand for Dabur India. Growth has been gradual to improve, but the slowdown in urban spending is near bottoming-out.
Should you buy, sell, or hold Dabur shares?
Dabur India's outlook remains weak despite tailwinds of high rural dependence, diversified portfolio, and a wider total addressable market (TAM). The company has been consistent in gaining share and expanding TAM, but growth remains elusive, said Emkay Global.
The brokerage added, "We await execution ramp-up, where Dabur needs to align with the evolving trend. After the negative surprise in Q2, the stock has seen valuations de-rated. While valuation is attractive, we await execution step-up." It maintained its 'add' target, with a price target of Rs 550 per share.
Given subdued urban demand and a consecutive weak performance by beverage business, Nuvama Institutional Equities cut its target price to Rs 635, from Rs 650 earlier, while keeping its buy rating intact.
International brokerage JPMorgan cut its target price on Dabur India shares to Rs 550 apiece, down from Rs 580, while maintaining its 'neutral' rating. The brokerage did note that it expects a gradual pickup in volumes going ahead.
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