Q1FY17 results were overshadowed by pervasive weakness in revenue growth across categories barring oral care and juices as demand conditions remained quite subdued. In our view, Dabur’s investment case will be driven by how successfully it can execute its product launches, regain momentum in its health supplement portfolio and make its premiumisation strategy work; otherwise its long-term investment case is likely to continue to remain overshadowed by the risk of whether Patanjali competition can spread to the significant part of its portfolio.
Q1 revenues and PAT grew at c.1% and .c11.8% respectively. Domestic FMCG business was up by 0.5% as buttressed by 4% volume growth. International business growth was 6%.The only bright-spot was oral care, which rose by 11.6% y-o-y. Growth was weak across the portfolio: hair oil business fell by c.3% y-o-y.
Home Care business growth of 2% was driven by strong growth in Odonil and Sanifresh brands. Health supplements business value growth was flattish. Digestive and OTC. Ethical sales growth declined due to category slowdown. Skin care business registered marginal decline. Outlook: Dabur believes near-term demand conditions are uncertain and is optimistic for some recovery in the second-half of the year. We raise our TP to `280 from `270 due to changes in our forecasts and roll forward our valuation.