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- 03 Feb 2022
- ICICIdirect Research
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DABUR SEES LIMITED IMPACT OF COMMODITY INFLATION
DABUR - 665 Change: 10.30 (1.57 %)News: Dabur India reported healthy results with 7.8% revenue growth to Rs.2941.8 crore. The company has taken price hikes to pass on elevated commodity inflation. We believe larger part of the growth is contributed by pricing. It is also important to note that base quarter sales growth was higher due to high growth in naturals, health supplements and Ayurveda products. Gross margins for the company contracted by 200 bps with crude based packaging costs remain at a high levels. However, unlike other FMCG companies, Dabur is least impact by commodity inflation given larger part of its raw material is herbs & agri based commodities, where inflation is not as high as it is in crude or palm oil. Overhead spends also increased 71 bps (% to sales) whereas employee spends were down 76 bps (% to sales). The company reduced its advertisement spends by 229 bps. Operating profit witnessed growth of 9.3% to Rs.627.5 crore and operating margins remain at 21.3% (up 29 bps). Net profit for the company grew 2.2% to Rs.504.4 crore.
Views: Dabur has been one of the biggest beneficiary of Covid-19 disruption with significant increase in demand for Ayurveda, health supplement & naturals products. Moreover, it is the most aggressive FMCG company in product development & foraying in newer categories like edible oil, fruit drinks, Home insecticides. We believe the company would be able to witnessed sustainable volume growth driven by newer products & distribution expansion rural regions. Further, the company is least impacted by commodity inflation given larger part of its commodity index is driven by herbs & agri commodity rather than palm oil & crude based materials. The company has leeway to aggressively spends on advertisement to push newer products. We remain positive on Dabur given sustainable growth & possibility of margin expansion, going forward.
Impact: Positive