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Dabur performs in line with expectations, keeps inflation at bay…

News: Dabur India's result was in line with estimates on revenue, operating profit & earnings front. Revenue grew 12% to Rs.2817.6 crore (I-direct estimates: Rs.2823.3 crore) led by 10% volume growth in domestic business during the quarter. India FMCG revenue grew by 11.9% and International business by 13.8%. Despite very high inflation, the company only saw 204 bps contraction in gross margins. Employee spends saw 105 bps saving while marketing spends came down by 86 bps, thus operating margins contracted by only 60 bps to 22%. Operating profit grew by 9% to Rs.620.7 crore (Idirect est. :Rs. 630.8 crore). Net profit grew 4.6% to Rs.505.3 crore (Idirect est. : Rs.509.3 crore). Category wise health supplement business degrew 13.6%, Chayawanprash & Honey brands grew above 20% on 2 year CAGR. Digestives and OTC & Ethnical products grew by 22.7% & 1.9%. Oral care, Hair oils, shampoos, home care & Skin care businesses grew by 13.3%, 27.9%, 20.5%, 25.3% & -11.9% respectively. Beverages witnessed 45% sales growth & foods category grew 13.9%. Company has continued to launch newer products across categories to drive growth.

Views: Dabur has been one of the beneficiaries of a shift in consumption trends towards health & wellness. The entire Ayurveda & naturals product categories have witnessed very strong growth in last two years with newer consumers adopting these new trends. The company has also launched very high numbers of products & SKUs during the period to drive penetration led growth. We believe the company’s ambition to enter high growing categories would drive growth in future. Dabur is also one of the few companies less impacted by high commodity inflation mainly due to higher proportions of herbs in the raw materials. We continue to like company’s strategy of driving growth through new products, expansion of rural distribution & leveraging the tailwinds of consumption trend of immunity, naturals & Ayurveda products.