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Healthy outlook, valuations limit major downside

Dabur has given optimistic outlook in demand led by 1) Healthy demand outlook for Hair oil & Food segment and 2) Steady margin guidance in an inflationary environment driven by cost savings and premiumization. 1Q numbers showed sequential bounce back in most segments with Hair oil segment growing 18%.

Dabur is confident to achieve double digit top line with sustained margin guidance on consol level led by healthy bounce back in most segments, strong growth in rural markets which continue to outpace urban markets and new initiatives and innovations. However Super El Nino & current geopolitical scenario has the potential to disrupt growth in both India and ME. Dabur is indicating upping the ante on acquisitions, however actual execution needs to be watched out for

We estimate a CAGR of 10.1% in Sales and 11.3% in EPS over FY27-28. Dabur trades at 32.6xFY28 EPS, which limits major downside in stock. Sustained double digit growth and success in D2C acquisitions remains key to re-rating of stock in LT. Retain Hold.

India volume up by 5% YoY: Revenues grew by 10.6% YoY to Rs37.6bn (PLe: Rs37.62bn). Gross margins expanded by 32bps YoY to 47.3% (Ple: 46.0%). EBITDA grew by 11% YoY to Rs7.4bn (PLe:Rs 7.39bn); Margins expanded by 8bps YoY to 19.7% (PLe:19.7%). Adj PAT grew by 15.3% YoY to Rs5.9bn (PLe:Rs5.65bn)

Consumer care revenues grew 10.9% YoY while EBIT grew by 12.3%. Margins contracted by 36bps YoY to 24.1%. Food segment revenues grew by 6.2% YoY while EBIT grew by 17.1%. Margins improved by 326bps YoY to 14%. Retail segment revenues grew by 7.1% YoY while EBIT grew by 38%. Margins improved by 24bps YoY to 2%.

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SEBI Registration number is INH000000933