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  • 05 Aug 2022
  • ICICIdirect Research

DABUR POSTS GOOD Q1FY23 NUMBERS

DABUR - 660 Change: -1.20 (-0.18 %)

News: Dabur witnessed revenue growth of 8.1% to Rs 2822.4 crore led by 51% growth in foods business (mainly consists of beverage brand ‘Real’). Consumer care business sales de-grew 1.4%, mainly due to high base of health supplements (Chyawanprash & Honey). With elevated inflation in crude based packaging material and sales decline of health supplement portfolio, gross margins contracted 224 bps. The 100 bps dip in gross margins is due to mix change & rest due to commodity inflation. Overhead spends were also higher by 160 bps due to high fuel prices (diesel). However, the company was able to save 164 bps and 32 bps in advertisement & employee spends, respectively. Operating profit dipped 1.5% to Rs 543.7 crore and operating margin contracted 188 bps. Higher other income & lower tax provisioning led to small 1% growth in net profit to Rs 441.1 crore.

View: Dabur has been continuing the strategy of growing through new product launches, innovations & foraying in newer categories. Though growth in health supplement business (Covid tailwind) has tapered down in last few quarters, the jump in beverage category has more than compensated the dip in health supplement sales. Given, the major part of the company’s raw material is herbs & agri products, margin impact on Dabur is least among FMCG companies. We believe the company would be able to leverage its brands Dabur, Real & Vatika by foraying in different categories. This would pave the way for growth in longer run and offset the impact of low growth in saturated categories like hair oils. We also believe Dabur has the ability to improve its operating margins going forward given dependency on imported raw material is least among FMCG companies. We remain positive on Dabur India.

Impact: Positive.