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Seasonal Drag Dampens Growth Momentum

Est. Vs. Actual for Q1FY26: Revenue – INLINE ; EBITDA – BEAT ; PAT – BEAT

Changes in Estimates post Q1FY26

FY26E/FY27E – Revenue: 1%/2%; EBITDA: 3%/4%; PAT: 3%/4%

Recommendation Rationale

• Dabur’s consolidated sales grew by ~2% YoY; however, they were impacted by unseasonal rains that hit peak summer demand, particularly in beverages and glucose. Excluding the seasonal portfolio, overall sales grew 7% YoY. Core categories like Digestives, Oral Care, Hair Care, Skin Care, and Home Care saw steady growth. The India business grew 4.3% YoY (exseasonals), while international business reported strong 13.7% constant currency growth in Q1FY26. Management maintains a high single-digit growth outlook for FY26, with expectations of double-digit growth for Q2FY26 on a low base, though the beverages portfolio may remain subdued with low single-digit growth.

• Rural markets continued to outperform urban markets for the fifth straight quarter, growing 450 bps ahead and reinforcing their role as Dabur’s key growth driver. While urban demand remains relatively subdued, sequential improvement driven by Modern Trade and emerging channels signals early signs of recovery. Management expects a gradual uptick in urban consumption through FY26.

• Gross margins contracted 75 bps YoY to 47%, impacted by elevated food inflation and higher trade promotions (Oral Care and Hair Oils). However, EBITDA margin expanded 6 bps YoY to 19.6%, aided by lower ad spends and cost efficiencies. The company mitigated ~7% inflation through calibrated price hikes (3–4%) and savings initiatives. While inflationary pressures are projected to remain elevated (~8%), management remains confident of preserving gross margins and improving operating margins through a better mix, portfolio premiumisation, and ongoing cost rationalisation efforts. Operating margin is expected to expand meaningfully in FY26, with no major pressure anticipated on gross margins for FY26.

Sector Outlook: Positive

Company Outlook & Guidance: While Dabur’s long-term growth trajectory remains intact, nearterm uncertainties—driven by a lag in demand recovery- warrant a cautious stance. Hence, we maintain our HOLD rating on the stock.

Current Valuation: 47x Mar-27 EPS (Earlier Valuation: 45x Mar-27 EPS ).

Current TP: Rs 560/share ( Earlier TP: Rs 510/share).

Recommendation: With an upside potential of 6% from the CMP, we maintain our HOLD rating on the stock

Financial Performance:

The company’s consolidated revenue grew by ~2% YoY to Rs 3,405 Cr, with the India business growing by 4.3% YoY (ex-seasonal), while the international business expanded by ~13.7% YoY in constant currency terms. Gross margins stood at 47%, down 75 bps YoY due to inflation, while EBITDA margins improved by 6 bps YoY to 19.6%, aided by 14.4% reductions in ad spends and cost efficiencies. The company reported a PAT of Rs 514 Cr, up by ~3% YoY, on account of price hikes and savings initiatives.

Outlook Dabur continues to grapple with near-term headwinds from inflation, seasonal volatility, and high base effects, further exacerbated by operating deleverage. Weakness in health supplements and subdued beverage demand, especially in urban areas, remain key drags. While management remains confident of a gradual recovery, aided by rural traction and sustained brand investments, we believe meaningful revival may take time. Hence, we maintain our HOLD rating on the stock.

Valuation & Recommendation

We have increased our estimates over FY26/27E and maintain our HOLD stance with a revised TP of Rs 560/share, implying an upside potential of 6% from the CMP.

Segmental Performance

1. Home &Personal Care

Dabur’s Home and Personal Care (HPC) segment delivered a 5% YoY growth in Q1FY26 with strong performance across key categories.

• Oral Care: Toothpaste grew 7.3% YoY on a high base, led by sustained momentum in Dabur Red and the accelerating Herbal portfolio, which outpaced non-Herbal by 440 bps. Market share gains continued in oral care.

• Hair Care: Hair Oils outperformed the category, led by Dabur Anmol and Pure Coconut Oil, gaining 214 bps market share — the highest ever for Dabur in the segment. The company remains focused on premiumisation and expanding new-age offerings in both Hair Oils and Shampoos.

• Home Care: The Home Care portfolio expanded 10% YoY, driven by robust growth in Odonil and Odomos. Odonil recorded 11% growth and gained 183 bps share, becoming the No.1 brand in air fresheners. Odomos benefited from early monsoons, delivering double-digit growth and 261 bps share gain.

• Skin Care: Skin care grew 9%, supported by strong performance in Gulabari and the premium positioning of OxyLife.

2. Healthcare Dabur’s

Healthcare segment (ex-Glucose) posted a healthy 2.7% YoY growth in Q1FY26, led by strong momentum in Health Supplements and Digestives and price hikes of approx 6%.

• Health Supplements: Chyawanprash surged 28% YoY, benefiting from early monsoons and effective contextual campaigns, with a 111 bps gain in market share. Dabur Honey grew 11% YoY with broad-based channel traction, led by premium variants like Sundarbans and Organic Honey, gaining 46 bps share. Glucose declined ~30% YoY, impacted by unseasonal rains and a high base (31% growth in Q1FY25), though Dabur still gained 118 bps share.

• Digestives: Hajmola grew 9% YoY, aided by strong variant mix (Chatcola, Limcola, Mr. Ram), with soft chews gaining consumer traction. Pudin Hara rose 7% YoY, driven by refreshed communication focusing on acidity relief. The Digestives portfolio gained 228 bps in market share.

• OTC & Ethicals: Honitus delivered 46% growth on the back of strong seasonal demand. Health Juices maintained momentum with an 18% YoY growth. Despite pressure in the glucose segment, the healthcare franchise demonstrated solid execution and consumer relevance, with consistent market share gains across key categories.

3. Foods and Beverages In Q1FY26, the Food and Beverages business de-grew by 14.3% YoY, mainly impacted by unseasonal rains in the peak summer months. The Activ range continued its strong double-digit growth trajectory, growing ~20% YoY, supported by increased demand for healthoriented offerings. Coconut Water witnessed robust traction, aided by a focused campaign around "hydration" and "no added sugar".The Real portfolio, however, faced headwinds due to a milder summer and unseasonal rains, impacting category performance. Despite this, Dabur gained 207 bps market share in the Nectars segment and 141 bps in 100% Juices, outperforming the category. The Culinary portfolio posted strong double-digit growth, led by products such as coconut milk, Lemoneez, and mustard oil. Badshah Masala domestic volumes also grew in double digits during the quarter, reflecting continued momentum in the spices business..

International Business

Dabur’s International Business delivered a strong performance, registering a 13.7% YoY growth in constant currency terms in Q1FY26. Growth was broad-based, led by the UK (+41%), Turkey (+36%), and Namaste (+30%). Sub-Saharan Africa and MENA regions reported healthy growth of 20% and 10.1% respectively, while Bangladesh's business expanded by 10.2% YoY in constant currency. Key Risks to Our Estimates and TP • Increase in competitive intensity, prolonged demand recovery, RM inflation, and advertisement spends.

Key Risks to Our Estimates and TP

• Increase in competitive intensity, prolonged demand recovery, RM inflation, and advertisement spends.

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