10 May , 2021 By : Kanchan Joshi
MUMBAI : Shares of Dabur India Ltd have declined more than 4% since it announced its March quarter results. Not without reason. Consolidated revenues have disappointed at Rs2,337 crore, missing Street expectations by a wide margin. For perspective: Bloomberg consensus estimates stood at nearly Rs2,628 crore.
As analysts from Jefferies India Pvt. Ltd point out, “While reported revenue growth at 25% appears strong, two-year CAGR has been weak at 5% and much slower than 9-11% seen in the last two quarters." CAGR is short for compound annual growth rate. In general, companies have a favourable base quarter this time around owing to the pandemic impact seen in last year's March quarter. Therefore, looking at the two-year CAGR trends may be helpful.
Emkay Global Financial Services Ltd’s analysts said in a report on 8 May, “Q4 was partly affected by low stocking, while secondary sales growth was better. However, despite the low stocking impact, sequential slowdown in healthcare was high."
Dabur’s domestic FMCG (fast-moving consumer goods) business grew by 28.4% year-on-year to Rs1,594 crore. In the domestic segment, the healthcare portfolio increased by 23% for the March quarter. Note that growth has slowed from 28% in the December quarter despite a favourable base. For perspective: healthcare segment revenues had declined by 12.6% in the March 2020 quarter.
On the other hand, home and personal care (HPC) segment’s revenues increased by 32.6% year-on-year last quarter, helped by a low base. “This was the first time in over two years when HPC growth was ahead of healthcare," said Jefferies analysts. Foods and beverages (F&B) segment saw 27.6% growth.
Dabur’s reported international business growth stood at 19.4%, which is better than 13% growth seen in the December quarter. Overall, Dabur’s consolidated gross profit margin contracted by 35 basis points to 48.74%. One basis point is hundredth of a per cent.
To be sure, after a dull show in the March quarter, it’s not as if outlook is particularly bright. Analysts have cut earnings estimates to factor in slower growth and lower margin assumptions. Emkay’s analysts said, “Though Q1FY22 could boost healthcare growth again, concerns remain over a post-pandemic slowdown. Management targets low single-digit growth in health supplements for FY22."
Currently, shares of Dabur India trade at around 49 times estimated earnings for financial year 2022, based on Bloomberg data. Near-term concerns could well limit meaningful upsides.
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