Reduce Dabur India Ltd For Target Rs. 540 By InCred Equities
Gradual improvement expected
* Consol. sales up 5.4% yoy in 2Q led by 4.3% growth in the domestic business, with 8.9% growth in the HPC segment. India volume growth stood at 2%.
* Gross/EBITDA margins expanded by 10bp/20bp yoy to 49.4%/18.4%, respectively. Margins are expected to remain range-bound in the medium term.
* Gradual improvement expected, 2HFY26F expected to see mid-to-high singledigit growth. Maintain HOLD with a new TP of Rs540 (44x Sep 2027F EPS).
Delayed winter-loading and GST transition dents overall growth
Dabur India (Dabur) posted 5.4% yoy consolidated sales growth in 2QFY26 led by 4.3% yoy sales growth in the domestic business, with 2% volume growth. India FMCG business posted 5.7% yoy sales growth. Sales momentum in Sep 2025 moderated due to the transitory impact of 66% of Dabur’s portfolio moving to the 5% Goods and Services Tax (GST) slab (causing a c.300-400bp impact on volume), as well as the impact of delayed winter inventory-loading (c.33% of sales). Overall sales growth was led by the Home & Personal Care (HPC) segment, which grew 8.9%, driven by strong performance in the oral care business, while healthcare and F&B segments posted 1.3%/1.7% yoy growth, respectively. Rural markets continued to outpace urban markets. International business grew by 7.7%/5.5% yoy in INR/constant currency or CC terms, respectively.
Strong performance in oral care on a low base led by herbal category
The toothpaste segment posted 14% yoy sales growth led by Dabur Red & Meswak brands outperforming the industry, with Colgate declining 6.2% and Hindustan Unilever witnessing a marginal decline during the quarter. Within the oral care industry, the ‘herbal’ category grew 5x faster than the non-herbal category, which is growing at 2%, with industry salience also improving by c.300-350bp over the past few years. Dabur will focus on trade schemes and distribution expansion, especially in rural markets, which will benefit in terms of lower GST slabs, especially in smaller-sized packs. The beverage biz continued to remain under pressure due to competitive intensity from carbonated beverages as well as extended monsoons, but the GST rate cut from 12% to 5% for juices should help make the category more attractive to consumers, especially in smaller packs. The honey range posted growth in the high-20s range. Categories like chywawanprash were also subdued due to delayed winter-loading; however, management aims to deseasonalize the category through new launches and shifting marketing communication from ‘immunity’ to other avenues of health.
Gradual improvement expected; retain HOLD with a TP of Rs540
Dabur’s focus will be more on distribution expansion in rural markets in the near term, which can see some gains from GST changes in smaller packs, while in urban markets it will focus on premiumization-driven growth. A new entity, Dabur Ventures, has also been set up to invest in early-stage brands in adjacent categories. We maintain HOLD rating on Dabur with a lower target price of Rs540 (44x Sep 2027F EPS) from Rs545 earlier. Downside/upside risks: Slower/faster-than-expected sales growth in the medium term.
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