Analysts not bullish on Dabur stock, but may outperform as growth recovers

Despite muted earnings in Q1FY26, analysts remain cautious on Dabur stock. However, there is potential for outperformance as earnings growth recovers in the coming quarters

The fast-moving consumer goods (FMCG) sector has seen deratings due to weak earnings, and the April-June quarter (Q1) of FY26 may mark the fourth consecutive quarter of muted earnings. The average P/E valuations for FMCG stocks are below the long-term mean.

 

Low taxes, liquidity easing, better monsoons, and a fall in some raw material costs could lead to a recovery. Overall demand remained stressed in Q1FY26, but FMCG players have taken price hikes to manage inflationary pressures. Volume growth is likely to be moderate, similar to the quarter ended March 2025 (Q4FY25). Gross margin pressure is also expected to persist.

 

Management commentary indicates that many companies hope for recovery in the July-August quarter (Q2) of FY26, with some expecting improvement in the second half of the ongoing fiscal year. In Q1FY26, unseasonal heavy rains may have dented summer-specific demand for talcum powder, juices, ice creams, and other products. Inflation in palm oil, tea, coffee, cocoa, wheat, and copra led to price hikes and grammage cuts. Advertising and promotion (A&P) spends are high due to competitive intensity. However, palm oil, wheat, and coffee have started softening on a quarter-on-quarter (QoQ) basis. 

 

Dabur’s Q1FY26 business update indicates that sales growth will be in the low single digits and EBITDA growth will be flat, but there may be volume improvement in urban areas. Dabur expects consolidated EBITDA growth to be lower than revenue growth, signalling margin pressure. Among channels, Modern Trade, E-Commerce, and Quick-Commerce continue to grow, but General Trade is under pressure.

 

The weather impacted beverage sales, while the Home and Personal Care (HPC) segment saw some improvement. Healthcare, which contributed 29 per cent of India and 21 per cent of consolidated sales in FY25, may have seen a small decline due to the rains. Brands that saw double-digit sales growth included Dabur Honey, Hajmola, Dabur Honitus, and Dabur Health Juices.

 

HPC contributed 46 per cent of India and 34 per cent of consolidated sales in FY25, and there may have been a pickup in Q1FY26, led by oral, home, and skin care categories. Dabur Red Toothpaste, Odonil, Odomos, and Gulabari-branded products are expected to post growth and market share gains. Beverages, which contributed 16 per cent of Indian and 11 per cent of consolidated sales in FY25, may have seen declines due to rains, according to management. The Real Activ portfolio (healthy juices and coconut water) reported mid-teens growth. The International business, which contributed 26 per cent of consolidated sales in FY25, saw double-digit constant currency growth led by markets such as MENA, Turkey, Bangladesh, and the US.

 

Dabur continues to see inventory corrections. While the Q4FY25 results were weak, Dabur has a low base and expects revenue growth to recover to high single digits and margins to improve in FY26. The company hiked prices by 3-4 per cent in Q4FY25, which should support revenue growth along with volume recovery.

 

Dabur has made strategic decisions, including a focus on portfolio premiumisation and investments in the healthcare and wellness spaces, along with rationalising the portfolio by exiting some smaller categories such as tea, baby diapers, and breakfast cereals, which contribute less than 1 per cent of sales. It is also open to acquisitions in premium, new-age healthcare, and wellness food categories. Segments that it will enter for premiumisation include hair care and post-bath categories like serums, conditioners, and masks. The target is to achieve a sustainable double-digit compounded annual growth rate (CAGR) by FY28 in both top-line and bottom-line. 

 

Dabur stock is currently well below its five-year price-to-earnings (P/E) valuations and also below the average discounts for the FMCG sector. While slower volume growth is a risk, there is potential for the stock to outperform as earnings growth recovers.

 

For now, analysts don’t seem to be excited. According to Bloomberg, 9 of the 19 analysts polled in July are neutral on the stock, while another 4 are bearish. Only 6 are bullish on the stock, which closed at ₹522.35 on Thursday on the BSE. The average one-year target price of these 19 analysts is ₹513.