Dabur reinvests margin gains in advertising. Will it fuel growth?

livemint.com:

₹659 in September 2021 following strong results in the June 2021 quarter (Q1FY22) during which it clocked 34% volume growth year-on-year. Ignoring that it had come off a low base owing to the impact of the covid-19 pandemic in the base quarter, investors extrapolated such strong growth would continue well into the future. This optimism has come at a cost, as the stock price still lags nearly 15% below its peak even after almost three years.

Since Q1FY22, sales volume growth has never exceeded double digits in any quarter, including the March quarter (Q4FY24). Dabur’s consolidated sales grew by 5% year-on-year in Q4FY24. While international volume growth data is not available, domestic volume growth was 4.2%.

As India accounted for 74% of total sales, it can be safely concluded that the consolidated topline growth also came in mainly from higher volumes. Despite higher sales, material costs stayed flat, enabling the 280 basis points (bps) expansion in gross margin to 48.6%. A bulk of it has been reinvested in brand building as the advertising cost rose by 21.1% year-on-year to ₹184 crore.

Consequently, the margin expansion at Ebitda level was 160 bps to 16.9%. The Ebitda margin is adjusted for the legal costs of Namaste, a subsidiary in America. It was the stellar performance of home and personal care (HPC) segment with 8.7% growth that helped overcome the lackluster performance of other divisions.

While healthcare sales fell by 1.5%, food and beverage segment remained flat. Still, Dabur has gained market share in most of the product across healthcare segment indicating that the industry as a whole had a soft quarter due to the delayed onset of winter. Dabur’s rural growth outpaced the urban growth during the quarter