Dabur’s fortunes tied to rural recovery

livemint.com:

Dabur India Ltd put up a dismal show on the bourses in 2023, falling by about 1% at a time when the sector index, Nifty FMCG, gained as much as 29%. A big worry for the fast-moving consumer goods company has been subdued volume performance in the previous few quarters. Sure, last week’s business update for the December quarter (Q3FY24) offers comfort, but only slightly.

Dabur said it saw sequential improvement in demand although growth in rural areas has lagged that in urban markets. Still, early signs of a revival in consumption would help volume growth inch up. “Unlike most consumer companies, Dabur witnessed a pick-up in rural demand, which should bode well in the coming quarters given its higher saliency in rural markets," said Nomura Financial Advisory and Securities (India) in a report on 4 January.

Analysts estimate rural markets to account for 45-50% of Dabur’s revenue. Marico Ltd’s Q3 update last week also pointed to similar demand trends in the FMCG sector on a sequential basis. Nomura expects Dabur’s domestic volume to have grown by 4% year-on-year in Q3.

In Q2, volume growth was 3%. In view of subdued pricing trends, revenue growth would be volume-led. Dabur’s food and beverage segment is expected to grow in high-single digit, while the home and personal care business is likely to clock growth in mid-single digit.

The delay in the onset of winter chills, however, would likely hurt Dabur’s healthcare business, which is expected to grow in low-to-mid single digit. Dabur’s international business continued with its robust momentum of double-digit growth in constant currency terms in Q3. Overall, the company expects consolidated revenue growth for the third quarter in mid-to-high single digit.