Dabur’s June quarter update is decent but fails to impress Street

livemint.com:

Dabur India Ltd fell over 2% in morning trade on the National Stock Exchange on Friday, despite a promising June quarter update. The firm highlighted signs of economic recovery in both urban and rural India, thanks to reduced inflation. However, the demand environment is yet to achieve a complete recovery even as it improved slightly sequentially, according to Dabur’s management.

Dabur’s India business revenue is likely to see high single-digit growth compared with the year-on-year growth of 4.7% in Q4FY23. The Q1 performance is anticipated to be driven by the healthcare and home & personal care segments, which are projected to report double-digit revenue growth following mid-single digit volume growth. The company’s international business is also on a stable footing with an expectation of double-digit growth in Q1, in constant currency terms.

Including the figures from Badshah Masala, Dabur’s consolidated revenue is likely to achieve growth over 10% in Q1, and hit a multi-quarter high. For perspective, in Q4FY23 and Q3FY23, Dabur’s consolidated revenue grew by 6.4% and 3.4%, respectively. “With the recovery of rural demand, stability in material costs and the favorable performance of various business segments are likely to result in healthy earnings growth in FY24," note analysts at Motilal Oswal Financial Services in a report on 6 July.

Dabur expects to see year-on-year expansion in its consolidated gross margin in Q1 led by softening of raw material prices. In Q1FY23, this metric stood at 45.9%. However, the trajectory of Ebitda margin needs to be watched as the company plans to increase advertisement and promotional spends.