Dabur India Ltd tanked 8 per cent in Thursday's trade, as a couple of brokerages turned cautious on its near-terms prospects, following the FMCG major's Q2 provisional performance that came in below Street expectations on account of inventory correction in the India business.
Consolidated revenue for Dabur India is expected to decline by mid-single digit in the September quarter, analysts warned while noting that a strong growth in organised channels led to an inventory build-up in the general trade (GT) channel over the last few quarters.
"We downgrade Dabur India to ADD from BUY with target price cut from Rs 750 per share to Rs 650 per share due to limited upside. We have been positive on Dabur India given expected improvement in the demand setting from rural recovery (45 per cent of revenue) and better winter demand (to aid mix). But Q2 inventory correction is a surprise," Emkay Global said.
Channel hygiene is an important issue with FMCG firms and a restoration would be key for growth ahead, it said.
Dabur India stock could be under pressure in the near term, said Nuvama Institutional Equities. While downstocking and pipeline correction in FMCG is not rare, the extent of impact on Dabur India seems surprising, it said. Q3 shall be slightly better than Q2 but consistency in growth is critical for a re-rating, it said. The cola price war remains a key monitorable for the beverages business, Nuvama said. This brokerage suggested a target price of Rs 760 on the Dabur India stock.
Dabur India shares fell 7.69 per cent to hit a low of Rs 571.25 on BSE.
Antique Stock Broking said inventory correction, strong growth in organised retail, and recovery in overall demand on the back of a good monsoon and the festive season should lead to a recovery in Dabur India's performance going ahead. It maintained its 'Buy' on the stock with a target price of Rs 718, based on 50 times PER on 1HFY27 earnings.
"Unlike peers taking corrective measures over a period of time, Dabur India has considered a one-time hit. Management sees growth rebound from Oct-24. Factoring in Q2 inventory correction (unlikely to reverse), we see earnings cut of 8-11 per cent over FY25-27E. We take back execution premium from valuation and value Dabur at 47x P/E," Emkay Global said.