Dabur India Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from Dabur India Limited (DABUR) Q2 FY24 Earnings Concall

• Financial Results
  • Revenue grew 10.4% in constant currency and 7.3% in INR terms to INR3,204 crores.
  • International business grew 23.6% in constant currency and 10.4% in INR terms.
  • India business ex-beverages grew 6% backed by 5% volume growth.
  • Consolidated operating profit grew 10% excluding one-off legal costs.
  • Gross margin expanded 300 bps on material cost reduction.
  • Consolidated operating profit grew 10%, while consolidated PAT increased 14.1%.
• Segment Performance
  • Home care grew 15% led by Odomos and Odonil.
  • Odonil growing faster than category growth of 20%.
  • Gained market share in mosquito repellents, air fresheners, toothpaste and hair oils.
  • Healthcare grew 5.4% with market share gains in Chyawanprash and honey.
  • Digestives grew 18.1% driven by Hajmola.
  • Beverages declined 10% due to uneven monsoon rainfall and new coconut water competitor Storia impacted market share.
  • Investing in aseptic pet bottles to boost coconut water sales.
• Growth Drivers
  • Distribution reach expanded to 1.4 million outlets directly.
  • Increased media investments by 43% to drive long-term growth.
  • Innovation across categories and countries gaining market share.
  • Onset of festive season expected to boost growth.
• Legal Issues
  • Lawsuit filed against US subsidiary Namaste Labs on product safety concerns.
  • Allegations disputed; portfolio in question is less than 1% of revenue.
  • 1% of sales from relaxer portfolio affected by lawsuit.
  • Building non-relaxer portfolio now 75-80% of business.
  • Matter is sub judice with product liability insurance in place.
  • The insurance covers a specific hourly rate for legal counsel, with any additional costs to be covered by the company.
  • Discovery phase had higher costs of INR30-35 crores per quarter.
  • Legal costs estimated at INR20-22 crores per quarter going forward for 2 plus years.
  • No legal merit seen due to inconclusive study basis and confident in winning given past precedent and safety studies.
  • Defense counsel costs incurred so far not recoverable.
• Advertising Spends
  • Ramping up ad spends in HPC categories like oral care and home care.
  • Peak ad spend is 8-10% of sales; currently at 7.5-8%.
  • Building brand equity and consideration set requires ad investments.
  • Less ad spend needed for impulse purchases like food and beverage.
• Festive Season Impact
  • Diwali season shifted by 20 days versus last year.
  • Loading of beverages and Chyawanprash got postponed to Q4.
  • Expect lost Q2 sales to be recovered in Q4 with season shift.
  • Seeing uptick in beverages and Chyawanprash sales in October and expects recovery in Chyawanprash in H2 with onset of winter.
• Margin Outlook
  • Benefited from input cost reductions in 2Q.
  • Confident of maintaining guided 19.5% margin for the year.
  • DABUR will try to better guidance despite legal costs of INR63 crores.
• Rural Recovery
  • Seeing gradual recovery in rural growth trends.
  • Rural growth is ahead of urban, benefitting from distribution expansion and increasing penetration.
  • Government measures driving rural demand.
  • South India lagging most in rural recovery currently.
• International Business
  • Expecting double digit constant currency growth in H2.
  • Situation in Middle East a potential headwind.
  • Gross margins expanded 600 bps on lower costs.
  • Depletion in costs to continue aiding margin growth.
• New Product Development
  • In the personal care industry, Cool King has achieved sales of around INR20 crores, while Dapper Red gel extensions have reached 25 crores in sales.
  • In healthcare, the baby care range and advocacy team achieved INR50 crores turnover.
  • In foods, coconut water in Tetra Pak reached INR20 crores sales, with additional capacity coming up.
  • Fizz and pet bottle products have achieved around INR20-25 crores turnover each.