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  • 27 Oct 2022
  • ICICIdirect Research

DABUR WITNESSES PRICING LED REVENUE GROWTH IN Q2FY23

DABUR - 506 Change: -4.35 (-0.85 %)

News:

 Dabur witnessed revenue growth of 6% to Rs2986.5 crore entirely led by pricing growth considering the company has taken 6-7% prices hikes in the last one year. Gross margins contracted by 346 bps given most FMCG companies were holding high-cost raw material inventories during the quarter. Overhead spends were higher by 48 bps and employee spends were flat. The company cut down advertisement spends by 209 bps to safeguard operating margin contraction. Operating profit witnessed a dip of 3.2% to Rs600.7 crore with operating margin contraction of 191 bps to 20.1%. Net profit de-grew 2.9% to Rs 490.9 crore.

View:

 Dabur witnessed three-year sales CAGR of 10.5% during the quarter with 7.1% CAGR in operating profit. Despite huge commodity inflation in the last one year, the company has seen least impact on operating margins that too specifically in the last two quarters. The company has been one of the most aggressive in new product launches and foraying in multiple newer category. This, along with the recent acquisition of BMPL, would help it increase the addressable market for future growth. Given some of the categories like hair oils and oral care are saturated categories with high penetration levels, FMCG companies need to enter newer underpenetrated categories to sustain growth momentum of the last one decade. We believe Dabur has been concentrating on increasing its addressable market specifically in many foods categories with high share of unorganised market. We remain positive on Dabur from a growth as well as margin expansion perspective.

Impact:

Positive.