Dabur Ltd is an Indian multinational consumer goods company which is headquartered in Ghaziabad. The company is into manufacturing Ayurvedic medicine and natural consumer products. Dabur is one of the major fast-moving consumer goods (FMCG) companies of India. Dabur procures about 60% of its revenue from the consumer care business, 11% from the food business and rest from the international business unit.
Quarterly Growth Walkthrough
Revenues from sales in the domestic market have grown by 6 percent which is supported by a 1 percent growth in volume. The international market has grown by a mere 3 percent (constant currency growth of 12 percent) caused by a severe currency transfers impact.
Gross margins were considerably lower by 350 basis points (bps), amongst it the 200 bps were caused by higher raw material inflation, 100 bps due to a reshuffling in the portfolio mix (lower revenues from healthcare segment) and 50 bps from others.
EBITDA declined due to higher employee and other expenses while advertisement cost was lowered to partly mitigate the impact.
| Sept 2022 | June 2022 | Sept 2021 | QoQ | YoY | |
| Revenues | 2986 | 2822 | 2818 | 6% | 6% |
| Cost of sold goods | 1631 | 1528 | 1442 | 7% | 13% |
| Gross profit | 1355 | 1294 | 1376 | 5% | -2% |
| Gross margin | 45.4% | 46% | 48.8% | -50 bps | -350 bps |
| Advertisement | 152 | 157 | 202 | -3% | -25% |
| EBIDTA | 601 | 544 | 621 | 10% | -3% |
| Profit After Tax | 490 | 440 | 504 | 11% | -3% |
Acquisition proposal of Badshah Masala Pvt Ltd
Dabur has made a pact for the share purchase agreement with the current promoters of Badshah to secure 51 percent of the equity share capital and the rest of the 49 percent in 5 years.
Badshah is a major giant in the spices and condiments category, with a major presence in Gujarat (40 percent sales contribution), Maharashtra (35 percent) and Telangana (10 percent). The company has around 5 percent market share in the masala segment.
Primarily, Badshah provides four categories of products (1) blended spices, (2) ground spices, (3) seasonings, and (4) premix tea. Blended spices contribute to 82 percent of the revenues. The company has more than 52 variants (300 plus SKU) in the Indian and international markets.
Through this acquisition, Dabur has infiltrated the Rs 25,000 crore branded spices category aligned with its strategy to expand the foods segment. The company is aiming for a target revenue of Rs 500 crore over the coming 3 years in the foods segment (omitting beverages), which is currently at Rs 100 crore.
Dabur has reported in its quarterly filing that Badshah’s current promoters will continue to run the masala business and Dabur will appoint a board to supervise the operations.
Long term panorama
The medium-term growth on revenue is powerful. This growth is supported by the initiatives on power brands, increasing distribution reach across urban and rural markets and new product launches.
Since the economic conditions have been tough, Dabur has shown remarkable performance and outstanding recovery with the beginning of the festive season. Dabur has a high probability of a recovery in volumes due to improved focus towards rural markets.
DIL plans to introduce new products primarily on e-commerce platforms. Once they see visible performance, the company would launch those new products for modern trade and later for general trade. Dabur aims to reduce the high expenses of advertisement and publicity.
Dabur is persistent in growing its addressable market size in the foods and beverages category through the acquisition of Badshah Masala, as well as the health and personal care categories through innovative launches. Dabur enjoys its large market share consider the leading position in majority of the categories where the company runs its business.
Dabur stock candlestick pattern shows a clear recovery as the downtrending phase has been taken over by the uptrending phase. We can see higher highs and higher lows from the low of June 2022. The stock price is facing heavy resistance on the 61.8% retracement level, it is most likely that the stock will soon have a breakout and hit its lifetime high of Rs 658.95 again to make a double top pattern. MFI is at 82 points on the weekly chart which indicates the stock is very expensive and overbought. Hence if the stock fails to make a break over the retracement level, then currently it is a very good short opportunity.
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