Dabur’s Q1 performance was broadly in line with estimates. Revenue in the quarter grew 10.6 per cent Y-o-Y, the highest growth in 12 quarters. The revenue growth was led by broad-based gains across the India and international businesses. The India FMCG business grew 9.5 per cent, aided by volume growth of 5 per cent. Among the segments, growth was led by home and personal care, which grew 12.3 per cent, while foods reported growth of 29.2 per cent. The healthcare and beverage segments disappointed the Street. The latter was affected by unseasonal rains, weighing on overall volume growth.
Hair care maintained its outperformance, aided by a 102-basis-point market-share gain in hair oils. The food business received a boost from the Badshah Masala spices, seasonings and culinary portfolios. While rural demand continued to outperform the urban segment for the eighth consecutive quarter, the gap narrowed because of a recovery in modern trade, e-commerce and quick commerce.
Rajesh Kumar and Mohit Dodeja of Emkay Research believe that weaker-than-expected monsoons will affect rural demand and pose a downside risk to earnings, given Dabur’s relatively higher share of the rural segment. Though the stock does not have major catalysts, the brokerage has an ‘add’ rating with a target price of ₹470, as it is trading at attractive valuations and has limited downside.
The international business recorded strong growth of 15.5 per cent Y-o-Y in rupee terms despite war-related disruptions in West Asia. Given the geographical headwinds, the West Asia and North Africa business saw moderation in growth. Bangladesh (up 34 per cent), sub-Saharan Africa (28.4 per cent), Turkey (26.9 per cent) and the UK (21.9 per cent) were the growth leaders in the international portfolio.
The company delivered a strong operating profit performance in the quarter. Profit growth of 11 per cent Y-o-Y was the highest in the past nine quarters. Further, it was ahead of topline growth for the third consecutive quarter despite an 8 per cent increase in costs. The company expanded its margins by 10 basis points Y-o-Y to 19.7 per cent. The gains were aided by Project Samriddhi’s cost discipline, operational efficiencies and judicious price increases.
After delivering muted sales growth in the past two years — 1.3 per cent in FY25 and 5 per cent in FY26 — the company is targeting double-digit consolidated revenue growth in FY27, as well as gradual margin expansion. Dabur expects topline growth to be aided by a mix of volume and pricing, with the latter contributing more to sales growth. Profitability gains could come from calibrated price increases, premiumisation, productivity initiatives and ongoing cost-saving measures, while mitigating commodity inflation.
Resilient rural demand, coupled with signs of improving urban demand, bodes well for Dabur’s growth outlook. However, Motilal Oswal Research believes that the pace of demand recovery, commodity inflation and the progress of the monsoon, including any El Niño-related risks, remain key monitorables for FY27.
