Dabur shares tumble 8% to 3-month low on weak Q2 business update; analysts cut target price

Dabur shares fell 8% in early morning trade on Thursday, October 3, to their three-month low of ₹571 apiece after the consumer goods maker projected a decline in revenue for the September quarter. This forecast led analysts to reduce their target prices on the stock, contributing to its worst intraday performance since March 2022.

The company on Tuesday said it expects a revenue fall in the mid-single digit percentage range for the September-ending quarter as heavy rain and floods across parts of the country impacted "out-of-home" consumption and consumer offtake during Q2FY25.

"Due to this, we saw some impact on our business, especially in the beverage category," the company said in its regulatory filing.

The food and beverage segment accounted for 14% of Dabur's overall revenue, according to its annual report for the year ended March 2024. 

Southwest monsoon rains in India hit a four-year high this season, experiencing about 108% of the long period average at 934.8 mm, data made available by the state-run weather bureau, India Meteorological Department, showed. A rainfall of 868.6 mm is the long-period average in India.

However, the company expects its international business to register double-digit constant currency growth in the top line. Badshah Masala Business continued to perform well, growing in double digits during the quarter, it added.

The company is confident that the growth will revive from Q3.

Analysts cut Dabur's target price

Domestic brokerage Emkay Global Financial Services downgraded the rating on the stock to 'add' from 'buy' and trimmed its target price to ₹650 apiece from ₹750 per share earlier.

"Amid sustained hiccups and required corrective measures, we take back the execution premium from the stock. Dabur has relatively underperformed (vs. peers), and we expect this to continue in the near term. We remain hopeful of business recovery on the back of rural rebound and better winter sales," said the brokerage. 

Global brokerage firm Citi reduced its target price for Dabur shares to ₹570 following the company’s business update and maintained a 'sell' rating on the stock. Meanwhile, Macquarie lowered its price target to ₹560, assigning a 'neutral' rating.

Investec predicts that the September quarter will be Dabur India's weakest in four years. The brokerage has a 'hold' rating on the stock, with a target price of ₹638 per share.

Nuvama Institutional Equities stated, "Although down-stocking and pipeline corrections in the FMCG sector are not uncommon, the level of impact on Dabur is unexpected." While the brokerage continues to recommend a ‘buy’ rating, it mentioned that Dabur India's stock may face pressure in the short term.

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