Dabur Q3 Results: Profit Up 6.2%, Margin Expands Slightly

Dabur India Ltd.’s third quarter profit rose, in line with analysts' estimates, and margin expanded slightly due to higher advertising expenses.

The consolidated net profit of the Ayurveda products maker rose 6.23% over the previous year to Rs 506.4 crore in the quarter ended December, according to an exchange filing. That compares with the Rs 516.2-crore consensus estimate of analysts tracked by Bloomberg.

Dabur India Q3 FY24 Highlights (Consolidated, YoY)

• Revenue rose 7% to Rs 3,255 crore, as against the projected Rs 3,266 crore.

• Operating profit increased 9.5% to Rs 667.8 crore, as compared with the Rs 669.6-crore forecast.

• Margin stood at 20.5% versus 20%, exactly in line with estimates.

• Domestic volume growth stood at 4%. With Badshah, it stands at 6%.

• Advertising spends surged 36% to Rs 244.5 crore.

"Moderating inflation coupled with buoyant consumer sentiments and our focused investment in distribution footprint expansion in rural India helped demand from the hinterland bounce back," Dabur India Chief Executive Officer Mohit Malhotra said in a statement.

For Dabur, rural demand grew 200 basis points ahead of urban. This comes at a time when rural is still lagging urban demand for the industry.

Dabur expanded its rural footprint to cover 17,000 additional villages, taking the total coverage to 1.17 lakh villages. "We are working towards ending this year with a rural coverage of 1.2 lakh villages," said Malhotra.

"Dabur's rural distribution has, in fact, been the highest in the industry, giving us a distinct advantage and helping drive our rural growth."

The company also stepped up investment behind brands to drive competitive volume growth, as reflected in the higher advertising spends.

In terms of categories, food and beverages outperformed home and personal care. A delayed winter, however, has shrunk demand for seasonal categories like Chyawanprash, hurting revenue of the healthcare division.

Dabur has gained market share in 90% of the product portfolio.

In hair oils, the company saw a 140 basis points improvement in market share. While it reported a 184 bps gain in air freshener market share, the market share gain in Chyawanprash stood at 151 bps during the quarter.

Categorywise Revenue Growth (YoY)

• Domestic food and beverage segment grew 6.7% to Rs 341 crore. The segment accounts for 15% of sales.

• Home and personal care, comprising 46% of sales, grew 6.6% to Rs 1,051 crore.

• Healthcare, comprising 38.8% of sales, rose 3% to Rs 883 crore.

• The oral care business ended the quarter with an industry leading growth of 8.1%, backed by toothpaste volume growth of 5%.

• The beverage category returned to positive growth trajectory.

Dabur's international business grew by 11.7% in constant currency terms, driven by Nigeria (54.9), Turkey (43.8%) and Egypt (43.1%), among others.

Separately, the company has earmarked capital expenditure of Rs 135 crore to set up a new plant in South India. Of this, Rs 125.3 crore will be utilised to expand the Red Toothpaste division, while the rest will be utilised for capacity expansion of Odonil and Honey divisions.

Currently, Red Toothpaste, Odonil and Honey have a capacity of 78,142 metric tonne per annum, 10,486 MT per annum and 39,600 MT per annum, respectively, across all its facilities.

These capacities are being utlised at a rate of 81%, 54% and 46%, respectively. Dabur proposes to add another 9,077 MT capacity for Red, and 1,789 MT capacity for the Odonil category.

While Honey business is not seeing capacity additions, lines are being shifted from other units, the company said in a statement.

The entire capex will be funded through internal accruals.

Shares of Dabur India rose 1.5% after the results were declared, as against a 0.8% gain in the benchmark Nifty 50.