Dabur India shares fall 4% as Q3 profit drops; what investors should do?

Shares of Dabur India fell nearly 4% in intraday trade on Friday, a day after the FMCG major reported lower-than-expected December quarter earnings, dented by the inflationary pressure. The stock has dropped in six out of the last seven sessions, falling nearly 7% during the same period.

Early today, Dabur India shares opened 1.1% higher at ₹560.05 against the previous closing price of ₹553.90 on the BSE. The FMCG stock, however, soon pared gains and dropped as much as 3.8% to hit an intraday low of ₹532.65. The market capitalisation slipped to ₹94,373 crore.

The share price of Dabur currently trades 13% lower than its 52-week high of ₹610.40 touched on December 7, 2022. It hit a 52-week low of ₹482.20 on June 17, 2022. The largecap stock has delivered a negative return of 5% in the last one year, while it has shed 7% in six month period. In the last one month, the stock has fallen nearly 6%, while it slipped 5% in a week.

The homegrown company, engaged in manufacturing of personal care, healthcare, and food products, reported a 5.5% decline in consolidated net profit to ₹476.65 crore for the December 2022 quarter, against a net profit of ₹504.35 crore in the year-ago period. The consolidated revenue rose 3.44% to ₹3,043.17 crore, from ₹2,941.75 crore a year ago.

“Dabur India reported a 3.4% growth in consolidated revenue for the quarter ended December 31,2022, to cross the ₹3,000-crore mark for the time in a quarter, despite a highly challenging cost and operating environment. Consolidated revenue posted a constant currency growth of 5.7%,” it said in a release.

On the operating front, EBITDA (Earnings before Interest, Taxes, Depreciation And Amortisation) slipped 2.7% to ₹610.4 crore, while operating margins fell 100 basis points to 20.1% from 21.3% YoY.

Analysts view on Dabur Q3

Post Q3 results, Sharekhan and Nirmal Bang have maintained 'buy' rating on Dabur India, while Prabhudas Lilladher has retained 'accumulate' rating on the stock. CLSA has also kept 'outperform' rating on the stock. Sharekhan and Nirmal Bang have given a revised price target of ₹640, while CLSA has given a target of ₹620 per share.

Prabhudas Lilladher has recommended a price target of ₹609, saying that rural revival holds the key to re-rating. The company’s volumes declined 3% during the December quarter, weighed down by weak rural demand. The inflationary pressures impacted demand in the rural markets as the shift to more affordable and smaller packs led to rural growth lagging urban markets for the second quarter in a row for Dabur, the management said in its earnings commentary.

“Dabur’s 3Q results showed a 3% decline in volumes while profits were in-line led by 24% lower ad spends. We remain optimistic on Dabur given visibility of green shoots in rural India, peaked out input costs, market share gains in key categories, and expected ramp up in fruit based drinks and Badshah Masala in coming periods,” Prabhudas Lilladher said in its report.