Dabur India premiumisation and pricing support earnings growth despite input inflation

Investment View and Valuation

In its July 29, 2026 result update, Anand Rathi Research maintained its BUY rating on Dabur India. The broker views Dabur as well placed to deliver healthy earnings growth through premiumisation, calibrated pricing and improved operating leverage.

The target price was reduced to Rs 550 from Rs 590, based on 42 times FY28E EPS of Rs 13.2, versus the previous valuation multiple of 45 times. At the report's CMP of Rs 433, the stock traded at 36 times FY27E EPS and 33 times FY28E EPS.

Strong Start to FY27

Dabur reported a strong start to FY27. Consolidated Q1 FY27 net sales rose 10.6 per cent year-on-year to Rs 37,644m, broadly in line with the street estimate of Rs 37,300m. India FMCG revenue grew 9.5 per cent, supported by 5 per cent volume growth, which was marginally below the broker's expectation of about 6 per cent.

Consolidated EBITDA increased 11.0 per cent year-on-year to Rs 7,414m and EBITDA margin expanded 10 basis points to 19.7 per cent. PAT grew 15.3 per cent to Rs 5,862m. The margin improvement reflected a 30-basis-point improvement in gross margin, partly offset by advertising expenditure and other expenses, each up 20 basis points; staff cost declined 10 basis points.

Domestic Business Performance

Domestic revenue increased 11 per cent, aided by volume growth and pricing. Home and Personal Care grew 12.3 per cent, Food and Beverages grew 7.2 per cent, and Healthcare grew 5.5 per cent.

Home and Personal Care

Hair care delivered high-teen growth. Hair oils recorded double-digit revenue growth and about 8 per cent volume growth, while Dabur gained 100 basis points of share. Shampoos grew in the early 20s following Vatika Bio Infusions. Herbal oral care outperformed the non-herbal segment by about 550 basis points.

Healthcare

Healthcare growth was led by Digestives and OTC. Honey gained 150 basis points of market share, Honitus grew 25 per cent, and the Science nutraceutical brand recorded three times growth. Management expects Science to reach about Rs 500m annual revenue by FY27-end.

Food and Beverages Recovery

Food and Beverages recovered in May and June after weather-related weakness in April 2026. Active Juices grew over 40 per cent and Coconut Water over 70 per cent, with market-share gains of about 600 basis points and 344 basis points respectively.

The Foods business grew about 30 per cent with double-digit volume expansion. Badshah expanded into Madhya Pradesh, Rajasthan and Delhi NCR; international Badshah revenue grew over 40 per cent, while e-commerce contributed about 6 per cent of its sales and grew at triple-digit rates.

International Business and Demand Trends

International business, representing 27 per cent of revenue, rose 15.5 per cent year-on-year in rupee terms despite Middle East disruptions. Growth in Bangladesh, Egypt, Turkey and the UK and EU was 34 per cent, 28 per cent, 27 per cent and 22 per cent respectively.

Rural demand exceeded urban growth by about 550 basis points in traditional trade, while e-commerce and modern trade delivered robust double-digit growth.

FY27 Outlook and Management Priorities

Management expects double-digit consolidated revenue growth in FY27E, driven by premiumisation, innovation, Project Saksham, sustained brand investment and pricing. It expects pricing to contribute more to growth as crude-linked inflation remains elevated, although volumes could remain slightly under pressure.

Earnings Estimates

Anand Rathi forecasts revenue CAGR of 8.5 per cent over FY26 to FY28E, comprising 8 per cent domestic and 10 per cent international revenue CAGR. It expects EBITDA margin to expand by 100 basis points to 19.5 per cent over the same period, aided by 40 basis points of gross-margin expansion.

The broker made marginal revisions: FY27E and FY28E sales estimates rose 0.1 per cent, EBITDA estimates fell 0.1 per cent, and PAT estimates increased 0.4 per cent and 0.3 per cent respectively.

Key Risks

• Failure of new launches.
• Pricing competition.
• Unwarranted or overpriced bolt-on acquisitions.
• Geopolitical turbulence affecting the international business and crude-linked input costs.