Shares of Dabur India fell nearly 8% to intra-day low of Rs 571 on NSE in early trading on Thursday following a wave of downgrades from multiple brokerages, which also slashed their target prices on the FMCG giant after its weaker-than-expected performance in the second quarter. Several analysts cited slowing demand and disappointing results as key reasons for the downgrades.
Citi Downgrades to ‘Sell’ with Lower Target Price
Global brokerage firm Citi issued a ‘Sell’ recommendation on Dabur, reducing its target price to Rs 570 per share. This downgrade follows Dabur’s weaker-than-expected performance in Q2, where consolidated revenue declined due to sluggish out-of-home consumption.
Citi also lowered its earnings estimates for FY25-27 by 3-6%, reflecting concerns over the company’s near-term outlook.
Macquarie Cuts EPS Forecasts and Target Price
Macquarie maintained a ‘Neutral’ rating on Dabur but cut its target price to Rs 560 per share. The brokerage reduced its earnings per share (EPS) forecasts for FY26 and FY27 by 5% each, and by 8% for FY25, primarily due to a Q2 inventory rationalization and slower-than-expected demand. While Dabur anticipates a recovery in sales from October 2024, Macquarie remains cautious about the sluggish demand momentum in the near term.
Emkay Global Downgrades to ‘Add’
Emkay Global downgraded Dabur from a ‘Buy’ to an ‘Add’ rating, lowering its target price to ₹650 per share from Rs 750, citing limited upside. The brokerage had previously been optimistic about Dabur’s growth potential, driven by rural recovery (which accounts for 45% of its revenue) and better winter demand. However, the surprise Q2 inventory correction led to an earnings revision of 8-11% over FY25-27.
Emkay highlighted the importance of channel hygiene in the FMCG sector and noted that Dabur’s decision to take a one-time hit for inventory correction contrasts with its peers, who are addressing similar issues gradually. The management expects a rebound in growth from October 2024, but the brokerage remains cautious due to the non-reversible nature of the Q2 correction.
Weather Impact and Revenue Decline
In its business update, Dabur acknowledged that extreme weather conditions, including floods and heavy rains, negatively impacted consumption and consumer offtake during the quarter. The company is now expected to post a mid-single-digit decline in consolidated revenue for the quarter ending September 30, 2024, mainly due to challenges in its India operations.
Dabur also indicated that its profitability would take a hit in Q2, with the operating margin expected to fall to the mid-to-high teens, driven by higher investments and deleveraging. Despite these setbacks, the company’s international business remains robust, with expectations of double-digit growth in constant currency terms for its top line.
Stocks Performance in Last One Year
In terms of stock performance, Dabur shares have demonstrated mixed returns across multiple time frames. Over the past month, the stock has given a negative return of 8.68% but the last six months have seen even more impressive results, with a substantial increase of 9.97%, indicating a strong upward trend.
Year-to-date, Dabur shares have surged by 4.80%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered an impressive return of over 5.48% in the last twelve months, emphasizing its sustained growth and attractiveness to investors.
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