Buy Dabur India Ltd For Target Rs.685 - Motilal Oswal Financial Services Ltd
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Revenue growth mainly led by volume
DABUR released its pre-quarterly update for 3QFY24. Here are the key highlights:
Consumption
* As per the management, overall demand improved sequentially; however, rural growth still lagged urban growth.
* Early signs of a revival in consumption were visible as volumes improved.
* Growth was led by volume, as price growth remained subdued due to price increases in 3QFY23.
India business
* HPC is expected to grow in mid-single digits.
* The F&B business may grow in high-single digits.
* The Health Care business is likely to grow in low to mid-single digits due to a delay in the winter season.
* Badshah Masala witnessed strong momentum and is expected to post strong volume-led growth in high twenties.
International business
* On a constant currency basis, the international business is expected to grow in double digits, led by the MENA region.
Consolidated
* The management expects consolidated revenue to grow in mid- to high-single digits (3.4% YoY in 3QFY23; 7.3% YoY in 2QFY24, 4-year CAGR at ~8.6%).
* It expects higher gross margin expansion, supported by moderating inflation and cost-saving initiatives.
* A significant portion of the gross margin expansion will be directed toward increasing advertising and promotion (A&P) spending.
* The management expects operating profit to grow at a slightly higher rate than revenue and post an improvement in YoY operating margins.
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