Dabur’s Disappointing Q4 Results Drag Down FMCG Sector
FMCG stocks took a hit on May 8, following Dabur India’s underwhelming fourth-quarter results, which sent shockwaves across the sector. The Nifty FMCG index, a benchmark for the FMCG segment on the National Stock Exchange (NSE), tumbled nearly 1%, becoming the worst-performing sectoral index on the day. This decline was largely attributed to Dabur’s flat revenue growth and an 8.5% year-on-year (YoY) drop in profit during the March quarter, which raised concerns about the ongoing sluggish demand, particularly in urban markets.
At 10:17 am on May 8, Dabur’s share price was down 1.5% at ₹475, continuing its downward trajectory. The stock had already faced considerable pressure after the company reported weak performance in the fourth quarter, attributed to a challenging demand environment in both urban and rural markets. Despite these challenges, Dabur’s management expressed cautious optimism, with CEO Mohit Malhotra expecting recovery in consumption over the coming months.
Highlights:
Dabur’s Q4 profit fell 8.5% YoY, impacting broader FMCG sector sentiment.
The Nifty FMCG index dropped nearly 1%, underperforming all other sectoral indices.
Dabur’s shares fell by 1.5%, signaling investor concern over weak performance.
CEO Mohit Malhotra expects a recovery in demand but cites current market challenges.
Brokerage Reactions and Downgrades Following Weak Results
In the wake of Dabur’s Q4 results, several brokerage houses reacted swiftly, adjusting their ratings and target prices for the stock. Nirmal Bang Institutional Equities downgraded Dabur to a “hold” rating from “buy,” with a revised target price of ₹540, down from ₹570. This downgrade was reflective of the company’s ongoing struggles in urban demand, particularly given that Dabur generates more than half of its sales from these markets.
Jefferies, however, maintained a “buy” rating on the stock but reduced its target price to ₹590, based on a lowered target multiple of 45x FY26 P/E, compared to the 52-54x range for peers such as Godrej Consumer and Marico. Macquarie also adopted a cautious stance, maintaining a “neutral” rating on Dabur following the disappointing results.
Highlights:
Nirmal Bang downgraded Dabur to ‘hold’ and lowered the target price to ₹540.
Jefferies revised its target price to ₹590 but maintained a ‘Buy’ rating.
Urban demand weakness continues to weigh on Dabur’s valuation and outlook.
Brokerage houses show divergent views, with some maintaining cautious optimism.
Broader FMCG Sector Faces Contagion; Other Stocks Also Drop
The negative sentiment surrounding Dabur’s performance quickly spread to other FMCG stocks, causing a broad-based decline in the sector. Tata Consumer Products saw a 2% drop, trading at ₹1,124, while ITC shares fell over 1.5%, hovering around ₹425. Other major FMCG players such as Colgate-Palmolive, Emami, and Marico also recorded losses of over 1%, while Hindustan Unilever (HUL), Varun Beverages, and Nestlé India were also trading in the red, albeit with more marginal losses.
The significant sell-off across FMCG stocks raised concerns about the overall health of the sector, particularly in light of ongoing demand weakness and higher input costs. As inflationary pressures persist, FMCG companies are expected to face margin compression, which may limit their growth potential in the near term.
Highlights:
Broader FMCG sector saw a sharp decline, with Tata Consumer and ITC leading the fall.
Colgate, Emami, and Marico recorded over 1% losses.
Investors are concerned about prolonged demand weakness and rising input costs.
The sector faces pressure despite strong long-term consumption trends.
A Few FMCG Stocks Buck the Trend with Gains
Not all FMCG stocks followed the negative trend. Radico Khaitan, a leader in the spirits industry, saw a sharp rise of over 1.3%, trading at ₹2,478 per share. This positive performance was attributed to Radico’s robust Q4 results, which featured a 71% YoY rise in net profit to ₹92 crore, surpassing market expectations. The strong performance of Radico Khaitan stood in contrast to the broader FMCG sector’s struggles and highlighted the potential for growth in specific niches of the FMCG space.
Additionally, stocks such as Godrej Consumer Products, United Breweries, Patanjali Foods, and Britannia Industries posted marginal gains, offering a silver lining amid the sector-wide downturn. These companies demonstrated resilience, partly due to their diversified product portfolios and strong presence in both urban and rural markets.
Highlights:
Radico Khaitan surged 1.3% following a 71% YoY rise in Q4 net profit.
Godrej Consumer, United Breweries, Patanjali Foods, and Britannia showed marginal gains.
Resilience in certain FMCG stocks highlighted the potential of niche markets.
Diversified portfolios helped some companies outperform the sector.
