Indian consumer goods giant Dabur India delivered mixed first-quarter results, beating earnings expectations despite revenue headwinds from unseasonal rainfall that dampened summer beverage demand. Analysts maintain a HOLD rating with a raised price target of Rs 560, citing near-term demand uncertainties.
Weather Disrupts Summer Portfolio Performance
Consolidated sales growth slowed to just 2% year-over-year to Rs 3,405 crore, as unexpected monsoon rains crushed peak summer demand for beverages and glucose products. However, stripping out seasonal categories revealed healthier 7% underlying growth, with core segments including digestives, oral care, hair care, and skin care showing resilient performance.
The company’s international operations continued their strong momentum with 13.7% constant currency growth, partially offsetting domestic challenges. Management maintains guidance for high single-digit growth in FY26, expecting double-digit expansion in Q2 on easier comparisons.
Rural Markets Drive Growth Engine
For the fifth consecutive quarter, rural markets significantly outpaced urban consumption, growing 450 basis points faster and cementing their position as Dabur’s primary growth catalyst. While urban demand remains sluggish, early signs of recovery emerged through modern trade and emerging channels.
“Rural continues to be our growth engine,” management noted, expressing confidence in gradual urban market recovery throughout FY26.
Margin Pressures Managed Despite Inflation
Gross margins compressed 75 basis points to 47% as food inflation and higher trade promotions in oral care and hair oils squeezed profitability. However, disciplined cost management delivered EBITDA margin expansion of 6 basis points to 19.6%, supported by 14.4% cuts in advertising spend.
The company successfully offset approximately 7% input cost inflation through strategic 3-4% price increases and operational efficiencies. With inflation pressures expected to persist at 8% levels, management remains confident about preserving margins through portfolio premiumization and cost rationalization.
Cautious Optimism Amid Recovery Lag
Net profit climbed 3% to Rs 514 crore, beating analyst estimates despite topline challenges. Trading at 47x forward March 2027 earnings, the stock offers limited 6% upside to the Rs 560 target price.
While Dabur’s long-term fundamentals remain intact, analysts cite demand recovery delays as reason for maintaining a cautious HOLD stance.
