Home >Markets >Mark To Market >Dabur India’s fourth quarter shows covid-19 impact; recovery to be slow
Dabur’s consolidated revenue for the March quarter declined by 12% year-on-year to  ₹1,865 crore. (Bloomberg)
Dabur’s consolidated revenue for the March quarter declined by 12% year-on-year to 1,865 crore. (Bloomberg)

Dabur India’s fourth quarter shows covid-19 impact; recovery to be slow

  • According to Dabur, the covid-19 crisis and the resultant nationwide lockdown caused severe disruptions in business, bringing sales to a virtual standstill
  • The stock has declined by 18% from its 52-week high seen in March on the NSE

At the onset of the March quarter results season, expectations were understandably running low. Still, Dabur India Ltd’s last quarter performance is discouraging. The company’s domestic volume declined by 14.6% for the quarter. This is among the worst performances seen in the consumer staples sector. Note that larger consumer staples peer Hindustan Unilever Ltd’s volume fell by 7% last quarter. Analysts have estimated Nestle India Ltd to have seen volume growth during the March quarter. Godrej Consumer Products Ltd saw its India business volume decrease by as much as 15%.

Having said that, Dabur’s volumes in the first two months rose by 4.6%, which doesn’t look too bad. For perspective, the company’s volume in the December quarter had increased by 5.6%.

Steep fall
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Steep fall

According to Dabur, the covid-19 crisis and the resultant nationwide lockdown caused severe disruptions in business, bringing sales to a virtual standstill in the second fortnight of March 2020. “With most of the products across our health care, home & personal care and foods portfolio falling in the non-essential category, the pre-season sales of summer skewed products to meet the seasonal demand was severely impacted," said the company.

Performance of its international business was muted too. Overall, Dabur’s consolidated revenue for the March quarter declined by 12% year-on-year to 1,865 crore. If there had been no covid-19 impact of 360 crore during the quarter, Dabur would have seen a 4.5% growth, based on its own assessment. Earnings before interest, taxes, depreciation and amortization (Ebitda) margin declined by 260 basis points to 18.9%. One basis point is one-hundredth of a percentage point. During the December quarter, Dabur’s Ebitda margin had expanded by about 70 basis points.

Dabur’s shares declined by about 1% on Wednesday, a day when the Nifty 50 index increased by 3%. The company announced the results towards the end of market hours.

The stock has declined by 18% from its 52-week high seen in March on the NSE. Even so, valuations are pricey with the stock currently trading at 42 times estimated earnings for this financial year, based on Bloomberg data.

Of course, with covid-19 looming, the outlook for the June quarter is subdued. The company expects a likely estimated impact (based on best judgement and normal growth scenario) of 400-450 crore on revenue for the current quarter. As of now, almost all of Dabur’s factories are running at an operational capacity of 60-70%. Investors will keenly watch how soon growth recovers to normal levels. Understandably, this is challenging to predict as of now. This may also cap meaningful gains in the stock in the near future.

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