Dabur India Gets Target Price Cuts From Brokerages On Weak Performance In Q2

Brokerages have lowered their target prices for Dabur India as its September-quarter results were impacted by inventory rationalisation in general trend denting domestic sales.

The FMCG company reported a net profit of Rs 418 crore, down 17.5% over the previous year, according to an exchange filing. That compares with the Rs 446 crore consensus estimate of analysts tracked by Bloomberg. The earnings were hurt by weaker demand in urban areas and heavy rains in parts of the country.

Nuvama has lowered its target price for the stock from Rs 760 to Rs 650, now implying an 18.9% upside, while maintaining a 'buy' rating. It explained that overall, domestic revenue decreased 7.6% year-on-year due to inventory rationalisation in GT to enhance distributors’ return on investment.

"Within the F&B space, beverages disappointed with 11.6% value decline owing to heavy monsoon and floods. In the healthcare space, OTC and Ethicals stood flat YoY," it said and added that the target price cut is also because of subdued urban demand and rising risk from ‘Campa'.

At the same time, it noted several positives for the stock given strong performance in various segments including health supplements/digestives, foods due to a healthy performance by Badshah, edible oils and ghee, and Homemade portfolio.

The company also announced that it is acquiring Ayurvedic hair care brand Sesa Care Pvt. for an estimated Rs 315-325 crore to expand its presence in the Rs 900 crore ayurvedic hair oil market.

On this, Citi Research's report said, "While the bolt-on acquisition of Sesa Care could help address the white space in ayurvedic oils, we note the category has been under pressure (Emami is the market leader with the Kesh King brand)."

The brokerage has maintained its 'sell' for the stock and lowered its target price from Rs 570 to Rs 520.00, implying a 4.9% downside as it cut FY25-27 earnings estimates by 3-7% post results.

Citing the company's management, Citi said inventory correction is to the tune of 9 days (reduced distributor inventory to 21 days from 30 days earlier). "We remain cautious on potential further inventory rationalisation," it said.

Even excluding this correction, the brokerage noted that underlying business trends in terms of secondary sales remain muted as "beverages likely impacted by increased competition (structural challenge in our view); health supplements grew 3% (despite pre-season loading led 12% growth in chyawanprash); oral care moderated to 5% YoY growth (plateauing of naturals withing oral care)."