ICICI Direct's research report on Dabur India
Dabur India (DIL) posted a dismal set of numbers with a 12.3% decline in sales & 24.2% dip in earnings. The results were impacted by a sharp dip in sales in March impacted by the lockdown. Though India business volume fell 14.6% in Q4, even January-February volumes were growing at a slower pace of 4.6% due to continued liquidity problems with trade channel. Gross margins contracted 70 bps, employee spend to sales increased 100 bps, A&P spend to sales increased 80 bps, resulting in 260 bps contraction in operating margins and 23% fall in operating profit. Health supplement (Chyawanprash, honey, glucose) sales declined 9.5%. Hair care, home care, oral care & skin categories witnessed 20.2%, 15.8%, 18.4% & 24.2% contraction in sales during the quarter. Further, foods (juices) category also saw a 20.6% dip in sales given disruption in pre-season sales.
DIL seems to be trying to convert adverse circumstances into opportunity by leveraging Dabur brand in hygiene & healthcare themes. We expect flat sales growth in FY21 and strong 16% recovery in FY22E considering its strong rural presence (targeting direct reach of 60,000 villages) that may see higher growth with migrants moving back and increase in government welfare spend. We maintain BUY with a target price of Rs 520/share.
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