Q2 Business Update: Dabur shares drop after mid-single digit revenue growth, margin pressure

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FMCG major Dabur India expects mid-single-digit revenue growth in the September quarter, according to an exchange filing. The company's international business is expected to grow in double digits in constant currency terms.

Geopolitical situations and unprecedented inflation led to weak demand trends across categories, according to the company. Rural markets faced some liquidity pressure, while the modern trade and e-commerce division saw double-digit growth.

Among various business segments, growth was led by the food and beverage business, while home and personal care may grow in mid-single digits. The healthcare vertical is likely to remain muted due to a high base courtesy of the pandemic.

The company also warned of margin pressures as inflation remained elevated during the quarter. The input cost pressures will result in operating margins declining by 150-200 basis points year-on-year. However, the companies expect improvement in margins compared to the June quarter.

The firm expects the margin will improve in the December quarter as commodity prices are easing, and inflation is also expected to cool off.

Dabur, in its exchange filing, mentioned that it continues to grow ahead of the industry and gain market share in most of its segments. Growth in international business was restricted due to currency devaluations during the quarter in markets like Turkey and Egypt.

Broking firm Motilal Oswal expects the current financial year to be the fourth out of the last five years where Dabur has reported double-digit sales growth. It also cites sales visibility for the company to be better than its peers, thereby translating into better-earning visibility. It has maintained its buy rating on the stock with a price target of Rs 660.

Shares of Dabur are trading 2 percent lower at Rs 535.20 as of 11:30 AM and are down 8 percent for the year.