Dabur’s volume growth in 1Q24 was 3% y-o-y, slightly lower than our estimated 5% y-o-y.
However, this dip was primarily due to lower sales in the juices segment, impacted by unseasonal rain. Excluding juices, the volume growth was a promising 6%, indicating a significant improvement compared to the flat growth seen in Q4FY23. This improvement was driven by a surge in rural demand, which we anticipate will continue to strengthen, leading to mid-to-high single-digit volume growth in the future.
Gross profit margin (GPM) expanded by 75 bps y-o-y, benefiting from lower raw material prices. However, operating profit margin (OPM) remained flat y-o-y due to a significant increase in advertising spending aimed at supporting future growth. The management plans to continue reinvesting its gross margin expansions into higher advertising and promotion (A&P) in the upcoming quarters, a move that we view positively. For FY24, the management anticipates OPM to stay within the range of 19-20%.
Dabur is targeting Rs 1.5 billion sales in its newly formed Dabur Therapeutic vertical, as it plans to reach 70k allopathy and ayurvedic practitioners. It is targeting Rs 5 billion sales in foods and Rs 500million in its Babycare, as it plans to introduce products in mainstream distribution.