Revenue Decline & Margin Hit:
Dabur India's Q2 FY24 results indicated a mid-single-digit decline in consolidated revenue, impacted by sluggish out-of-home consumption and inventory correction.
Stock Downgrade:
Multiple brokerages downgraded Dabur's stock rating, leading to an 8% fall in share price during Thursday’s trading session.
Brokerage Views:
Earnings Forecast:
Analysts have revised FY25-27 earnings estimates downward by 3-11%, factoring in Q2 inventory corrections.
Management Outlook:
Despite a weak Q2, Dabur expects a sales recovery starting October, driven by rural demand recovery and seasonal factors.
International Performance:
The international business remained robust, with double-digit growth in constant currency terms.
| Parameters | Q2 FY24 Performance |
|---|---|
| Revenue Growth | Mid-single-digit decline |
| Operating Margin | Expected decline to mid-to-high teens |
| Inventory Correction | Pipeline inventory buildup reported |
| Brokerage Ratings | Downgraded by Citi, Macquarie, Emkay |
| EPS Estimates (FY25-27) | Revised downwards by 3-11% |
| International Business | Strong double-digit constant growth |
| Current Share Price | ₹573.55 (7.34% lower) |
Citi:
Downgraded to ‘Sell’ with a target price of ₹570. Reasons include sluggish out-of-home consumption and weak rural demand, resulting in 3-6% reduction in FY25-27 earnings estimates.
Macquarie:
Maintained 'Neutral' rating with a target price of ₹560, citing inventory rationalization and a slower-than-expected demand environment, impacting FY25 earnings by 8%.
Emkay Global:
Revised to ‘Add’ from ‘Buy’, lowering target price to ₹650 from ₹750 earlier. Notes pipeline buildup and Q2 inventory correction as primary concerns.
Dabur expects a sales rebound from October 2024 driven by rural demand recovery and improved seasonal trends. However, continued inventory correction and margin pressure remain short-term concerns.
With 25 'Buy', 15 'Hold', and 2 'Sell' ratings out of 43 analysts, the stock outlook remains cautiously optimistic, contingent on demand recovery and inventory stabilization.
Dabur's Q2 FY24 performance has put near-term pressure on its stock, as reflected by brokerage downgrades. However, a positive outlook on rural recovery and international growth offers some long-term potential.
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