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Steady growth on higher market share

Dabur India Ltd (Dabur), a leading Indian FMCG company, is a global leader in ayurveda with a portfolio of over 250 herbal/ ayurvedic products. The company provides health supplements, digestives, shampoos, hair oils, skin care, oral care, foods and other OTC and ethical products. • In Q1FY25, Dabur’s consolidated revenue grew 7.0% YoY to Rs. 3,349cr driven by growth across key categories in both domestic and international markets. • EBITDA grew to 8.3% YoY to Rs. 655cr aided by robust revenue and controlled costs. EBITDA margin was stable at 19.6% (+30bps YoY). • Dabur posted steady growth in Q1FY25 with progression across all segments. Its higher market share across key segments is expected to bolster its future performance. Hence, we retain our BUY rating on the stock with a target price of Rs. 709 based on 52x FY26E adjusted EPS.

Growth across categories aids top line

In Q1FY25, Dabur’s consolidated revenue grew 7.0% YoY to Rs. 3,349cr (+9.8% YoY in constant currency [cc]), driven by a 7.3% YoY growth in the Indian business (including the Badshah business) and 18.4% YoY cc growth in the international business. Domestic business volume grew 5.2% YoY on account of growth across segments and rural markets. Domestic healthcare revenue rose 7% YoY on the back of a 10.7% YoY value growth in digestives and a 7.8% YoY value growth in health supplements. While the summer season boosted the glucose business by over 30% YoY with 70bps gain in market share but performance of some brands such as Shilajit and Honitus was subdued. Home and personal care (HPC) revenue grew 8.1% YoY with 11.4% YoY value growth in oral care, 13.7% YoY growth in shampoos, and 6.1% YoY value growth in skincare. Food and beverages revenue grew 4% YoY driven by a 21.3% YoY value growth in foods and a 15.0% YoY value growth in Badshah but offset by lower juices and nectar segment (J&N) as a harsh summer shifted consumer preferences towards thirst-quenching products.

EBITDA higher on robust revenue

EBITDA grew 8.3% YoY to Rs. 655cr on account of robust revenue. EBITDA margin widened 30bps YoY to 19.6% because of moderation in inflation and cost saving initiatives, partially offset by about 16% YoY increase in advertising and promotional expenses owing to an increase in digital spends. As a result, Dabur registered a net profit of Rs. 500cr, up 7.8% YoY.

Key concall highlights

* Dabur reduced the prices of Badshah products for some stock keeping units to pass on low commodity prices to customers. Badshah’s international business faced some supply-chain disruptions, but the company assured that they would be resolved soon.

* In Q1FY25, rural demand outpaced urban demand by 350bps. Dabur is expected to cater to this rural demand through the launch of affordable and rural-specific pack bundles across categories.

Valuation

In Q1FY25, Dabur reported market share gains across 95% of its Indian product portfolio, a reflection of robust product demand and strengthened market position of the company. Positive feedback on new innovations and strategic distribution efforts in rural areas are expected to bolster demand in the near term. Further, positive benefits from Samriddhi project could expand the margin. Hence, we retain our BUY rating on the stock with a target price of Rs. 709 based on 52x FY26E adjusted EPS.

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