DABUR India (DABUR) 2QFY22 result was above our estimates. DABUR continued to post strong double digit growth on a high base driven by market share gains across all key verticals; Health Care, Home Care, Personal Care and Foods. Health Care witnessed some moderation in demand especially for health supplements compared to previous quarters, but tailwinds still persists and DABUR continues to gain market share from competition.
Revenue growth in HPC and Foods portfolio is tracking well; aggressive product launches and strong market share gains are healthy signs. Urban market grew at higher rate compared to rural for DABUR.
"Positively, international business continues to post strong recovery. Contraction in gross margin due to rise in raw material price is concerning and is likely to persist. As per revised outlook on inflation; we have marginally trimmed our EPS estimates for FY22E by 3%. We maintain our estimates for FY23E and have introduced FY24E in our forecast. We maintain BUY rating on the stock with a TP of Rs 736 (vs previous TP of Rs 722),” stated IDBI Capital Equity Research.
Key highlights and investment rationale
Market share gains drive double digit revenue growth on a high base: Consolidated revenue grew 12%YoY (v/s 14%YoY in 2QFY21) driven by 12%YoY growth in India FMCG business (+10%YoY volume growth) while International business grew 11%YoY (+14% CC growth). Revenue from Food and Home and Personal Care portfolio grew 43% YoY and 17% YoY (on a base of -4%YoY and 9%YoY) respectively. Revenue from Health Care declined 5%YoY due to high base of 49%YoY. Positively; DABUR continues to gain market share in chyawanprash (520bp YoY), honey (430bp YoY), toothpaste (+40bp YoY), hair oil (+80bp YoY), Shampoo (+30bp YoY), Odomos (+120bp YoY) and Real (+100bp YoY).
Inflation impacts operating profit: Consolidated gross margin contracted 204bps YoY (3rd consecutive decline) to 49% due to inflation in raw material cost. EBITDA margin contracted 60bp YoY to 22%. Adjusted PAT grew 5%YoY.
Maintain BUY: As per revised business outlook; we have trimmed our EPS estimates for FY22E by 3% while maintain estimates for FY23E. We have introduced FY24E in our forecast. We maintain BUY rating on the stock with a revised TP of Rs 736. We value DABUR on 55x FY23E.
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