Dabur shares drop 5% post Q4 results, but brokerages remain upbeat: Here's why

The shares of Dabur India Ltd on Friday ended in red on Friday after posting a weak set of numbers for the March quarter of the financial year 2022-23. Dabur India shares ended nearly 5 per cent down on Friday.

Dabur India shares ended 4.77 per cent lower on ₹505.20 on BSE. The stock has lost more than 7 percent in 2023 so far.

The company had announced its March quarter results on 4 May. FMCG major Dabur India Ltd on Thursday reported a decline in 0.5 per cent in consolidated net profit to ₹292.76 crore for the quarter ended March 2023. This is against a net profit of ₹294.34 crore in the year ago period.

The consolidated revenue from operations rose by 6.4 per cent to ₹2,677.80 crore for the quarter under review as against ₹2,517.81 crore in the year ago period. The earnings before interest, taxes, depreciation and amortization fell 9.6 per cent YoY to ₹410 crore. Operating margin declined to 15.3 percent from 18 percent in the year-ago period.

Motilal Oswal in its report said that the revenue was in line with our estimates in 4QFY23. The brokerage said volumes grew 1% as cpmapred to its expectation of 5%.

"Rural markets remained lackluster; however, the management witnessed some green shoots at the end of the quarter. Despite near-term challenges, Dabur (with nearly half of its domestic sales coming from rural) remains a good play on the incipient but gradual rural demand recovery theme. We retain our target P/E multiple of 45x FY25E EPS to arrive at a TP of INR595. Maintain BUY," said Motilal Oswal in its report.

While brokerage Prabhudas Lilladhar said that rural demand remains under pressure. It retained ‘accumulated’ with a target price of ₹590.

“We believe Dabur is a formidable play on growth revival in rural India given 45% contribution to overall sales. We believe sustained innovation and launches in core segments like Healthcare, F&B, Oral Care can accelerate growth in coming quarters. We estimate 21.3% EPS CAGR over FY23-25 and arrive at DCF based target price of Rs590 (45xFY25E EPS). Dabur trades at 40.4x Mar25 EPS with 20.8% ROE and 50% dividend payout. Retain accumulate,” said the brokerage.

The revival of rural demand holds a key for revival in the Dabur’s performance in the coming quarters, said Kaustubh Pawaskar, Deputy VP Fundamental Research at Sharekhan by BNP Paribas.

“Dabur posted yet another quarter of weak performance affected by slowdown in the rural demand resulting in mid single digit revenue growth while 250+BPS decline in OPM resulting 10% decline in PAT. Recovery in rural demand holds a key for revival in the Dabur’s performance in the coming quarters. Management is hoping for single digit volume growth in FY2024. The stock has already corrected by ~17% from its high and trading at reasonable valuations of 44x/37x its FY2024/25E earnings. We have a Buy rating on the stock with PT of Rs605,” he said.

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