Q4FY23 Review: Dabur India: Poor margin guidance

5 May 2023 , 10:52 AM

Dabur India (Dabur) reported sales growth of 6.4% and EBITDA decline of 10% YoY. While pre-quarterly release did mention margin decline, the expectation was that it would largely be in the International business. However, even standalone EBITDA declined 8% for reasons that are not fully understand. Moreover, EBITDA margin guidance for FY24 was muted, which was a key negative in the call. The company mentioned they would target 19-19.5% EBITDA margin in FY24, which comes as a surprise given that they had reported 19.8% in first-3 quarters. The company has discontinued 180 SKUs, which did not receive good response in the market. With secondary sales growth at 10% this quarter, double-digit, top-line growth seems likely in future, and the worst seems to be behind. 

With continued focus on developing categories and strong ambitions in the Foods space, with Badshah and Homemade, analysts at IIFL Capital Services believe that Dabur should be on the growth path soon. However, the stock may be weak in near term.

Analysts at IIFL Capital Services have cut their EPS estimates by 8%/6% for FY24/FY25 and have maintained their Buy recommendation on the stock with a price target of Rs. 590.