Accumulate Dabur India - Q1FY23 Result Update - Market share gain powers growth

Mr. Amnish Aggarwal, Director - Research at Prabhudas Lilladher Pvt Ltd.

Quick Pointers:

- Strong Growth and market share gains in beverages

- Aggressive towards expansion/innovation via ecommerce.

- New Product developments contribution at 4.4% to overall sales in 1Q23.

Dabur has shown ~5% volume growth on high base led by market share gains in fruit drinks, foods & beverages and hair oil. We expect gross margin pressure to sustain in 2Q23 given input cost inflation mainly in petroleum products however with softening of RM prices & roll over impact of price hikes expect recovery to set in from 2H23. Normal monsoons, good harvest & increase in MSP will drive demand in rural in near/medium term. Long term outlook remains intact given 1) Innovation led growth strategy with focus on 8 core brands 2) Increasing share in foods & beverages & Hair care category 3) LUP Innovations allowing DABUR to leverage its distribution 4) Strong rural distribution coverage of 100k villages by FY23. 5) 4-5% incremental sales every year from ecommerce innovations.

Dabur remains a formidable play on recovery in rural demand in coming quarters. Dabur trades at 42.7x FY24 EPS with 14.1% EPS CAGR over FY22-24 and 23% ROE and 50% dividend payout. Retain accumulate with 12 month DCF based target price of Rs 603 (No change).

Consol Revenues up by 8.1%; Margin at 45.9%: Revenues grew by 8.1% YoY to Rs28.2bn. Gross margins contracted by 224bps YoY & 159 bps QoQ to 45.9%. EBITDA declined by 1.5% YoY to Rs5.4bn. Margins contracted by 188bps YoY to 19.3%. Adj PAT grew by 0.6% YoY to Rs4.4bn. Food segment revenues grew by 51.3% YoY; EBIT grew by 65.8%; margins expanded by 100bps YoY to 22.4%. Retail segment revenues grew 179.9% YoY on low base; EBIT came in at Rs 10mn in 1Q23 vs loss of Rs 30mn in 1Q22. Consumer care degrew 1.5% YoY whereas EBIT margin grew 100 bps QoQ to 22.4%.

Concall Highlights: 1) Urban / Rural growth remained at par with 8.3/8.4% respectively. 2) NPD in fruit drinks has gained traction and it aims to increase sales to Rs 2bn in 2-3 years. 4) Market share of real juices increase by 330 bps driven by milk shakes (gained 1.1% market share 5) Healthcare segment witnessed de-growth and would remain impacted in FY23, although CAGR of 10% will be maintained in FY23. 6) Ayurveda shampoo has gained traction with 50 bps increase in market share. 7) Vatika Neelibhringa 2 in 1 Oil launched at Rs400 (33% discount to competition) in the super premium Ayurveda oils market of Rs 10bn 8) In 1Q23, took absolute price increase of 5% & 1.1% in form of grammage reduction against inflation of 8-9%. 9) Hair Oil segment has gained traction due to aggressive marketing, regional focus & distribution expansion. 10) Rural distribution coverage will reach upto 100k villages by FY23.

Shares of Dabur India Limited was last trading in BSE at Rs. 586.20 as compared to the previous close of Rs. 579.50. The total number of shares traded during the day was 87702 in over 3707 trades.

The stock hit an intraday high of Rs. 587.50 and intraday low of 578.05. The net turnover during the day was Rs. 51150469.00.

Source : Equity Bulls

Keywords

DaburIndia INE016A01026 Q1FY23 ResultUpdate PrabhudasLilladher