Our recent meeting with Dabur’s management team reiterated steady demand scenario and firm’s improving execution. Amidst increasing to steady market share and waning intensity from Patanjali, Dabur expects volumes to grow in low double digits. Investment in distribution, A&P and ESOP charge will impact FY19 margins but FY20 should see a healthy uptick helped by benign RM. Maintain Buy with Rs 460 PT.
Rural growth continues to outpace urban growth though the gap has narrowed. Though other high-ticket sectors have seen some slowdown, the same trend is not visible in FMCG yet. Rather urban demand which is steady now can see some pick-up due to a shift in wallet share to low ticket FMCG. Though festive demand was not as buoyant, winter has seen good traction (good for health supplements). Impact of Patanjali has come down significantly in the market and the company has gained all the market share lost to the brand. Within channels, e-com and modern trade continues to do well while urban wholesale is witnessing soft growth.
Market share gains continue (up 120bps YoY) in hair oils. Flanker strategy with sub-brands of amla such as Brahmi has worked well. Performance of Sarson has also been good (a INR1bn brand). Similarly with Anmol and Vatika, company has garnered 5% share in coconut oil segment. Oral care: Red franchise continues to grow in double digits but Babool is facing high competition in the INR10 pack as competition has launched all the key brands in that LUP. Juices: Though the category has seen some slowdown and competition remains high, the company has maintained its market share.
Though things are picking up on underlying basis, GCC remains impacted by geopolitical issues and Turkey by currency devaluation. Expected to grow in mid-to-high single digits. Though RMs have eased in Q3FY19, its impact will come in Q4FY19.