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Business News/ Markets / Stock Markets/  Dabur India warns of margin hit in Q2 as inflation bites

Consumer goods major Dabur India today flagged that soaring inflation during the second quarter could lower its operating margin by around 150-200 basis points year-on-year. "During the quarter, inflation was at peak levels which impacted gross margins," Dabur said in a regulatory filing while sharing an update on the performance and demand trends witnessed during the quarter ended September 30, 2022.

The company is due to report earnings for the second quarter ended September on October 26. Dabur shares jumped around 15% in the quarter, in line with gains in the Nifty FMCG index.

The maker of toothpaste and packaged juices expects the consolidated revenue to grow at mid-single digit in the September quarter. Dabur's consolidated revenue grew 8.1% in the June-quarter, with an operating margin of 19.62%.

However, going ahead, easing commodity prices to help improve margins in the second half of the year. And moderating inflation and festive season should support consumption growth in the second half of the fiscal.

India's retail inflation accelerated to 7% in August on surging food prices after dipping to 6.71% in July. Consumer price inflation data for September is expected next Wednesday.


“Geopolitical situation continued to impact the business with unprecedented inflation during the quarter. This led to weak demand trends across categories. Urban markets were driven by modern trade and ecommerce which saw double-digit growth. Rural markets witnessed some pressure in terms of liquidity," Dabur said.

Food & Beverages vertical continued to lead with robust double-digit growth on a high base of 43% growth in Q2FY22 while home and personal care portfolio is expected to record mid-single digit growth on a high base of 16.7% growth in Q2FY22, Dabur said.

Healthcare vertical is expected to report a hear double-digit growth in terms of 3-year CAGR but will see a muted performance during the quarter on the back of high Covid base, it added.

Dabur International Business

“International Business is expected to post double-digit revenue growth in constant currency. However, some of our markets like Turkey and Egypt continued to see currency devaluation during the quarter impacting the translated growth," the company said.

Dabur shares had ended 1.5% lower at 545 on BSE today. Domestic brokerage Prabhudas Lilladher has a accumulate rating on the stock with target price of 604.

“We expect 4.5% realization growth by the company and volume growth of 5.5%. Gross Margins to contract by 260bps YoY to 46.2%. EBITDA Margins to contract 150bps & PAT expected to grow by 2.5%," the brokerage had said in a recent note.

On the overall consumer sector stocks that it tracks, the brokerage said: “We expect margins to bottom out in 2Q with sequential margin expansion in 2H, due to price hikes being absorbed and softening of commodity prices. Consumer demand & sentiments were largely unchanged during 2Q23 which saw impact of 1) further price hikes and inflation and 2) continued rural weakness. However, there exists a huge pent up demand across QSR, Apparel and Retail segments. Discretionary demand remained strong, more so with high sales proportion from middle and upper middle class of population. We expect varied trend in volume growth across segments like staples, Food, QSR, Jewellery, Paints etc."

(With Agency Inputs)



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Updated: 06 Oct 2022, 05:30 PM IST
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