Dabur stock lacks triggers amid weak financial show
Dabur India Ltd is finding it tougher to boost sales amid gloomy demand conditions for the entire FMCG sector. Weak execution and unfavourable seasonality are some factors that led to a miserable March quarter (Q4FY25).
Consolidated revenue was flattish year-on-year at ₹2,830 crore, entirely driven by pricing, with domestic sales volume dropping about 5%. Revenue from domestic home and personal care, healthcare, and beverages portfolios declined 3.3%, 4.7%, and 9.2%, respectively. Food grew by 14%.
Dabur's international business, contributing about 29% of total Q4 sales, clocked 19% constant currency growth. But that did not move the needle much. Overall profit margins slipped to multi-quarter lows. Gross margin contracted 192 basis points (bps) year-on-year to 46.7% as raw material costs rose steeply. A decline in staff costs and advertisement & publicity expenses helped curb the Ebitda margin drop to 150 bps to 15%. Thus, Q4 Ebitda declined 8.5% over the previous year.
With most of its categories reporting a decline in revenue, the upcoming season will be critical to track, said a report by Motilal Oswal Financial Services, adding, 'Near-term growth worries persist amid weak summer season demand and slow power brands' performance."
Also Read: Q4 earnings watch: Whispers of rural recovery as revenues buck broader trend
Dabur increased prices by 3.5% last quarter to cope with rising costs. The price hike benefits should start to kick in Q1FY26, thus leading to sequential margin improvement. The management expects high single-digit to near double-digit revenue growth in FY26 on a low base of 1.3% growth in FY25.
Based on recommendations from McKinsey, Dabur announced a 'refreshed vision' strategy to accelerate profitable growth. The company has identified seven initiatives, such as investment in core brands, premiumization and contemporization across categories, and bold bets across health and wellness spaces.
'While refreshed vision is a step in the right direction, we see challenges to core categories – especially rising competitive intensity in oral care, hair oils & beverages; and healthcare category relevance still remaining weak. As a result, performance for Dabur has been volatile versus other Staples peers," said JM Financial Institutional Securities Ltd.
Dabur's shares are down about 16% in the past year, underperforming the sectoral Nifty FMCG index. The stock trades at 41 times FY26 estimated earnings, as per Bloomberg data. Near-term triggers appear limited as the pace of growth is unlikely to see a dramatic rise immediately, although the Street may reward sustainable signs of improvement in revenue trajectory.
Also Read: FMCG slowdown prompts Dabur to shorten strategy review timeline
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
2 days ago
- Time of India
Auto ancillary stocks shift into top gear, but caution lights on
Auto ancillary companies have generated higher investor interest over the past month amid buoyancy in the broader market. However, investors need to be cautious since the sector may face pressure due to muted demand for commercial and passenger vehicle (CV and PV) demand. Of the 22per cent increase posted by the ET-auto ancillaries index in the past three months, 13% was in one month, reflecting improved traction in these stocks. For a sample of 22 auto component companies, half have posted year-on-year revenue growth in the March quarter in double-digits. However, only eight of them have recorded double-digit growth in net profit. While seven companies posted double-digit growth in operating profit before depreciation and amortization, operating margin expanded for 8 companies. The two-wheeler companies reported a slower volume growth in the second half of FY25 after a strong growth in the first six months according to Motilal Oswal Financial Services (MOFSL). Tractors was the only segment that witnessed a strong demand recovery. The automobiles sector saw earnings downgrades for FY26 as margin may take a hit amid rising input costs and tepid growth visibility. 'The recent appreciation of the rupee against the dollar is a key monitorable for exports-focused companies. Given these factors, FY26 is expected to be a year of modest earnings growth for most companies under our coverage,' said MOFSL. The margin outlook for global original equipment manufacturers (OEM) adds to the uncertainty. According to Elara Capital, top international auto makers including Mercedes-Benz, Porsche and Ford have either downgraded or suspended guidance for 2025, citing tariff risks, market share loss in China, and margin headwinds. This may impact Indian auto parts suppliers with global linkages like Bharat Forge, Sona BLW.
Mint
2 days ago
- Mint
NSE investors hold tight as price surges in grey market
Everyone seems to want a piece of the National Stock Exchange (NSE) even before its anticipated public market debut. The bourse's unlisted shares are in short supply in the private market, having surged 40% since last week to shrink its discount to BSE Ltd. 'NSE shares were trading at a 50% discount to BSE's at least five-six months back," Sanat Mondal, head of private markets at Sanctum Wealth told Mint. 'In the last few weeks, the discount has narrowed in the range of 10-15%." NSE's privately held shares are trading between ₹2,375 and ₹2,419 apiece. That's 48 times its FY25 earnings, according to UnlistedZone, a private market broker for retail investors. Rival BSE commands a multiple of 64.2 times its FY25 earnings, according to a recent Motilal Oswal Financial Services report. The market has perceived recent reports of NSE exploring a ₹1,000 crore regulatory settlement with the Securities Exchange Board of India (Sebi) as a step closer to its IPO, said Mondal. Read more: MSEI investors uncertain about their bet after Sebi expiry day rule However, there is still little clarity on when the exchange will make its stock market debut—a major risk associated with unlisted equities, according to experts. 'NSE is trading at a discount to BSE mainly because there is no clarity on its IPO yet," Mondal said. 'Technically, there shouldn't be so much of a discount because, fundamentally, those are similar companies. Even (profit) margin-wise, both are comparable." With a hold on at least 90% of India's equity volume in cash and derivative segments, NSE dwarfs BSE by size and scale. Hence, it stands to be a key beneficiary of India's ongoing transformation as a saver-to-investor economy, according to a Motilal Oswal Financial Services report from December. 'We foresee 15% revenue and 22% net profit CAGR (compound annual growth rate) over FY24-27, largely led by a 16% CAGR in transaction income, owing to exponential growth in retail volumes," the report said. 'The overall growth will be primarily driven by F&O (futures and options) volumes." Over 1 lakh shareholders, already NSE generates over 65% of its total revenue as profit, much of it in cash, which is a strong indicator of its robust business model, said Saurabh Rungta, CIO at Avendus Wealth Management and who himself holds unlisted NSE shares. 'Considering its enduring moat and long growth runway, we believe NSE may have the potential to be a consistent compounder over time, that investors can comfortably hold in their portfolios." NSE's value proposition is so lucrative, the company already has over 1 lakh unlisted shareholders, up from 39,201 in March, according to Sunil Chandak, founder and director of Gennext Investrade, a Mumbai-based unlisted equity dealing firm. 'Once its ISIN got unfrozen in March, the shares became freely tradable. Moreover, restrictions on minimum lot size were also removed. As a result, retail investors just lapped (NSE's) shares up," Chandak said. Right now, NSE is being touted as 'India's most valuable unlisted company" in the private market. In fact, Chandak calls NSE 'the stock of India" – a company exemplifying the promise of India's growth story in the coming decades. Read more: ITC Hotels soared 30% from its low. Is it still a hidden gem? Such exuberance has propelled NSE's market capitalization to ₹5.87 lakh crore, ahead of blue-chip giants such as ITC Ltd and Larson & Toubro Ltd. 'Given its strong unlisted demand, the risk of under-allotment or no allotment is real for retail investors hoping to invest in NSE's inevitable IPO, unless the offering is large," Avendus's Rungta said. Hence, retail investors are now flocking to the private market to bypass the uncertainty of allotments in IPOs, said Vijay Kuppa, CEO of InCred Money. But even there, the supply of NSE shares has dried up. Valuation rerating unlikely Existing investors are now unwilling to sell their shares as they expect the exchange to hit the public markets soon, offering a much better exit at a significantly higher post-IPO price. To be sure, unlisted NSE shares have already returned almost 230% in the last three years, according to UnlistedZone. As a result, barring the initial listing day gains, experts are not anticipating outsized returns post its IPO. 'The stock has compounded at over 50% CAGR in the last five years, which is unlikely to repeat over the next five. Much of the valuation re-rating has already happened," Avendus's Rungta said. Moreover, since NSE does not have any promoters and its ownership is widely dispersed, Rungta expects continuous supply pressure from existing shareholders to keep its share price subdued, especially after the lock-in period ends. Sebi's mandate of at least 25% public shareholding in all listed companies will only ensure this outcome, he said. Beware the hype of unlisted markets As the listed arena becomes crowded and opportunities to make outsized returns diminish, retail investors are increasingly exploring the private market. It has evolved from an opaque, niche segment into a semi-formal asset class, mainly attracting high net worth individuals (HNIs), family offices and wealth managers. Read more: India's super rich are back to betting on IPOs The unlisted space offers the allure of owning shares of 'exceptional" companies at cheap valuations with hopes of significant post-IPO price appreciation, said Kuppa from IncredMoney. New investors might not find NSE easily accessible in the private market today. But the unlisted space is broader than one name, and there are many other interesting companies to explore, depending on their risk appetite and time horizon, Kuppa said. 'Some of the most talked-about companies like OYO, Chennai Super Kings or PharmEasy have been accessible only through the unlisted route for years. Retail investors value the chance to be part of these journeys before the public market does," he added. However, experts warn retail investors, who are jumping into the private market following NSE's hype, that promises of substantial post-IPO gains may not always come true. 'By the time the lock-in period ends six months after a company's IPO, its shares in the public market might trade at a lower price than in the unlisted market, resulting in losses for investors," Mondal from Sanctum Wealth said. According to Yatin Singh, CEO of investment banking at Emkay Global Financial Services, NSE should not be the barometer for the private market's success. 'Rather, it is an exception, as it is more liquid than most unlisted companies out there." Inexperienced retail investors might find it difficult to exit promptly from unlisted shares as the market is more illiquid than public exchanges, said Singh. 'Investments in the unlisted market are generally riskier because the companies usually do not have enough scale, maturity and the guarantee of eventual IPOs. Essentially, investors are unprotected here. Hence, their valuations seem discounted to listed peers," he added. Unlike listed companies with publicly disclosed financials, unlisted companies often operate without a similar level of transparency, fuelling speculation and exaggeration. That's often reflected in their grey market premiums (GMP), which is used to gauge the demand for an IPO-bound company. Read more: IRCTC's Ebitda growth rate mirrors pace of a slow-moving train GMPs typically include the valuation multiples of comparable listed peers, growth projections, valuations in recent fundraising rounds and any notable secondary transactions, said Avendus's Rungta. But hype does play a role. 'In several instances, we've seen unlisted stocks command disproportionately high GMPs, either due to inflated expectations, incorrect or optimistic business projections or simply FOMO," he added. Singh from Emkay Global warns that GMPs can also be manipulated. 'Promoters can artificially create a perception of high demand for a mediocre company's paper. They can inflate GMPs through some of their own money via unofficial channels and market operators to ensure a decent start to their listed journey," he said. Retail investors looking to invest in the private market must have access to the right network and due diligence. Else, they can fall prey to exorbitant prices, as there is no parity in prices due to the opaque structure of the market, said Mondal from Sanctum Wealth. Avendus's Rungta said deal defaults, transfer disputes and miscommunication on fundamentals also plague the private market. 'Combined with lack of transparency, asymmetrical price discovery and the inherent illiquidity, this market is best suited for informed and patient investors and not for momentum-driven bettors." Read more: KEC is making amends to repair margin, allay debt concerns
Economic Times
2 days ago
- Economic Times
Auto ancillary stocks shift into top gear but caution lights flash
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Auto ancillary companies have generated higher investor interest over the past month amid buoyancy in the broader market. However, investors need to be cautious since the sector may face pressure due to muted demand for commercial and passenger vehicle (CV and PV) demand. Of the 22% increase posted by the ET-Auto Ancillaries index in the past three months, 13% was in one month, reflecting improved traction in these a sample of 22 auto component companies , half have posted year-on-year revenue growth in the March quarter in double-digits. However, only eight of them have recorded double-digit growth in net profit. While seven companies posted double-digit growth in operating profit before depreciation and amortization (EBITDA), operating margin expanded for eight two-wheeler companies reported a slower volume growth in the second half of FY25 after a strong growth in the first six months according to Motilal Oswal Financial Services (MOFSL). Tractors was the only segment that witnessed a strong demand automobiles sector saw earnings downgrades for FY26 as margin may take a hit amid rising input costs and tepid growth visibility. 'The recent appreciation of the rupee against the dollar is a key monitorable for exports-focused companies. Given these factors, FY26 is expected to be a year of modest earnings growth for most companies under our coverage,' said margin outlook for global original equipment manufacturers (OEM) adds to the uncertainty. According to Elara Capital, top international auto makers including Mercedes-Benz, Porsche and Ford have either downgraded or suspended guidance for 2025, citing tariff risks, market share loss in China, and margin headwinds. This may impact Indian auto parts suppliers with global linkages like Bharat Forge Sona BLW , and Motherson Sumi A possible turnaround in the entry level demand for bikes driven by the rural market after a lacklustre trend in the recent quarters, new product launches and the vehicle scrappage policy hold the key for a demand uptick in the near term, according to YES Securities. It expects gross margins to be under marginal pressure due to a possible material inflation, cushioned partially by favourable product mix in the first half of FY26. In addition, the income tax relief is anticipated to boost demand, especially for price-sensitive fundamentals showing signs of fatigue, analysts advise caution in near term. Stocks with strong domestic demand drivers, rural exposure, and EV-related product lines may hold up better, but margin pressures and global uncertainties could limit further upside. According to MOFSL, the recent stock market rally has led to the normalisation of valuation multiples which had fallen in the recent past. 'The earnings outlook for the sector appears benign, given the modest volume growth outlook and expectations of rising input cost pressure,' the brokerage stated in the report, highlighting that it prefers Endurance Technologies and Happy Forgings among auto ancillaries stocks.
