Dabur India - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 517, MCap - Rs. 89,476 crore)

Dabur India reported robust sales & earnings growth ahead of our expectation.

Q2FY21 Earnings Summary

- Consolidated revenues grew by 13.7% led by strong 17.9% growth in India business. International business witnessed a muted 2.6% growth. India FMCG business grew by 19.8% supported by 16.8% volume growth. The India business FMCG growth was backed by 70.8% growth in health supplement (Chyawanprash grew 2x, Honey double digit growth), 56.1% growth in OTC products & 26.4% growth in Ethical segment. Oral care, Shampoos & Skin & Saloon (Including Sanitizers products) also witnessed splendid growth of 24.2%, 17.8% & 38.1% respectively. Some of the categories dependent on outdoor activity (Beverages -4.8% & digestives 2.5% growth) witnessed muted sales. We believe more than 50 launched in immunity boosting, Ayurveda & sanitizers category resulted in strong growth momentum

- Gross margins remained flat with higher palm oil prices off-setting lower packaging cost (crude beneficiary) benefit. However employee spends to sales & other overhead spends to sales were lower by 30 bps & 163 bps respectively. Surprisingly, advertisement spend were higher by 152 bps. We have seen consumer companies cutting ad-spends (or benefited by lower ad-rates) in last six months. Operating profit increased by 16.3% to Rs. 569.4 crore. Operating margins expanded by 50 bps to 22.6%

- Led by strong sales growth & margin expansion, net profit saw a robust 19.2% growth in net profit to Rs. 482.9 crore

With the positive consumption trends towards immunity boosting, Ayurveda products, the company was able to leverage this trend with numerous new launches in last six months. We believe the consumption trend towards health, immunity boosting products would continue going forward given health awareness has increased considerably in a post Covid world. With stronger gross margins, the company was able to continue to advertise & give promotions to drive sales. Further, it has been able to gain market share in Chyawanprash, Oral care & shampoo categories. International business muted growth was largely impacted by MENA region. We continue to believe immunity boosting, Ayurveda based products & hygiene space has huge potential to grow on a sustainable basis, which would continue to aid revenue & profitability for Dabur. We remain positive on the stock.

We will be coming out with detailed update after the conference call with the management.

Shares of DABUR INDIA LTD. was last trading in BSE at Rs.517.5 as compared to the previous close of Rs. 506.15. The total number of shares traded during the day was 318039 in over 6461 trades.

The stock hit an intraday high of Rs. 523.25 and intraday low of 509.75. The net turnover during the day was Rs. 164545220.

Source : Equity Bulls

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