The September quarter results reflect a company navigating seasonal headwinds whilst maintaining year-on-year growth momentum. Whilst top-line expansion remained modest at 5.37% YoY, the sequential decline of 6.26% from the June quarter's ₹3,404.58 crores indicates typical seasonal patterns in the FMCG sector. The company's PAT margin of 13.94% remains healthy, though compressed from the previous quarter's 14.93%.
With a current market price of ₹515.00, the stock trades at a premium valuation of 50.50 times trailing earnings, reflecting investor confidence in the company's long-term Ayurvedic and herbal product portfolio. However, the stock has underperformed the broader market over the past year, delivering negative returns of 0.66% against the Sensex's 7.88% gain, resulting in a negative alpha of 8.54%.
Financial Performance: Seasonal Softness Weighs on Sequential Growth
Dabur India's Q2 FY26 performance reveals a tale of two comparisons. On a year-on-year basis, the company demonstrated resilience with net sales advancing 5.37% to ₹3,191.32 crores from ₹3,028.59 crores in Q2 FY25. Consolidated net profit grew 6.48% YoY to ₹452.55 crores, suggesting the company successfully navigated inflationary pressures and maintained pricing power in its core categories.
However, the sequential comparison paints a more challenging picture. Revenue declined 6.26% from Q1 FY26's ₹3,404.58 crores, whilst net profit contracted 11.94% from ₹513.91 crores. This sequential softness reflects the typical seasonality in FMCG consumption patterns, where the April-June quarter often benefits from summer-related demand for health and personal care products.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 3,191.32 | -6.26% | 452.55 | -11.94% | 18.43% | 13.94% |
| Jun'25 | 3,404.58 | +20.30% | 513.91 | +60.53% | 19.62% | 14.93% |
| Mar'25 | 2,830.14 | -15.65% | 320.13 | -38.72% | 15.08% | 11.05% |
| Dec'24 | 3,355.25 | +10.79% | 522.38 | +22.91% | 20.32% | 15.37% |
| Sep'24 | 3,028.59 | -9.57% | 425.00 | -15.02% | 18.24% | 13.79% |
| Jun'24 | 3,349.11 | +18.99% | 500.12 | +43.08% | 19.56% | 14.76% |
| Mar'24 | 2,814.64 | — | 349.53 | — | 16.59% | 12.12% |
Operating profit (PBDIT) excluding other income stood at ₹588.07 crores in Q2 FY26, translating to an operating margin of 18.43%. Whilst this represents a 19 basis point improvement year-on-year from 18.24%, it marks a 119 basis point sequential contraction from Q1 FY26's 19.62%. The margin compression reflects elevated employee costs of ₹347.87 crores (up 2.99% QoQ) and the typical seasonal mix shift in product categories.
The company's gross profit margin for Q2 FY26 stood at 21.57%, down from 22.83% in the previous quarter but marginally below the 21.68% recorded in Q2 FY25. This suggests relatively stable raw material cost dynamics, though the company continues to navigate input cost volatility across its herbal and natural ingredient portfolio.
Margin Dynamics: Balancing Growth and Profitability
The 119 basis point sequential decline in operating margins from 19.62% to 18.43% warrants attention. Whilst year-on-year margins improved modestly, the quarterly compression suggests the company faced headwinds in maintaining pricing power or optimising its product mix during the September quarter. With PAT margins at 13.94%, Dabur maintains healthy profitability, but sustaining margin expansion will be critical for driving shareholder returns given the premium valuation multiple.
Operational Efficiency: Strong Returns on Capital Deployed
Dabur India's operational efficiency metrics paint a picture of a well-managed business generating healthy returns on deployed capital. The company's average Return on Equity (ROE) of 18.97% over recent years demonstrates effective capital utilisation, though it trails some premium FMCG peers. The latest ROE of 16.51% reflects the company's ability to generate substantial returns for shareholders despite operating in a competitive and mature market.
More impressively, Dabur's average Return on Capital Employed (ROCE) stands at 23.23%, with the latest reading at 24.16%. This elevated ROCE indicates the company efficiently converts its capital investments into operating profits, a critical metric for asset-heavy FMCG businesses managing manufacturing facilities, distribution networks, and working capital requirements across diverse product categories.
The company's balance sheet strength remains a defining characteristic. With an average net debt-to-equity ratio of -0.28, Dabur operates as a net cash company, providing significant financial flexibility for organic growth investments, acquisitions, or shareholder returns. As of March 2025, the company held shareholder funds of ₹10,800.69 crores against long-term debt of just ₹304.03 crores, reflecting conservative financial management.
Key Strength: Fortress Balance Sheet
Dabur's average EBIT-to-interest coverage of 28.90 times demonstrates exceptional debt servicing capability. The company's debt-to-EBITDA ratio of just 0.50 times provides substantial headroom for strategic investments or navigating economic downturns. With zero promoter pledging and institutional holdings of 28.44%, the company enjoys strong governance credentials and investor confidence.
However, the company's five-year sales growth of 7.96% and EBIT growth of just 3.58% reveal a more sobering reality. Whilst Dabur has maintained market leadership in Ayurvedic products, top-line expansion has been modest, and profit growth has lagged revenue growth, indicating margin pressures or increased competitive intensity in core categories.
Industry Context: Navigating FMCG Headwinds
The Indian FMCG sector has faced a challenging operating environment characterised by volatile raw material costs, evolving consumer preferences, and intensifying competition from both established players and emerging digital-first brands. Dabur's modest 5.37% YoY revenue growth in Q2 FY26 reflects these broader industry dynamics, where volume growth has been subdued despite pricing actions.
The company's performance must be viewed against the backdrop of changing consumer behaviour. The post-pandemic period has seen accelerated adoption of e-commerce channels, increased focus on health and wellness products, and growing preference for natural and Ayurvedic formulations—trends that should theoretically favour Dabur's product portfolio. However, translating these tailwinds into accelerated growth has proven challenging.
Dabur's competitive positioning in the Ayurvedic and herbal products segment remains strong, with established brands like Dabur Chyawanprash, Dabur Honey, Dabur Red Paste, and Vatika commanding significant market shares. However, the company faces competition not only from traditional FMCG players like Hindustan Unilever and Colgate-Palmolive but also from emerging Ayurvedic specialists like Patanjali and Himalaya.
| Metric | FY25 | FY24 | FY23 | FY22 | FY21 |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 12,563 | 12,404 | 11,529 | 10,888 | 9,561 |
| YoY Growth | +1.3% | +7.6% | +5.9% | +13.9% | +10.1% |
| Operating Margin | 18.4% | 19.3% | 18.8% | 20.7% | 20.9% |
| PAT (₹ Cr) | 1,739 | 1,811 | 1,702 | 1,744 | 1,695 |
| PAT Margin | 13.8% | 14.6% | 14.8% | 16.0% | 17.7% |
The five-year trend reveals a concerning pattern of margin erosion. Operating margins have compressed from 20.9% in FY21 to 18.4% in FY25, whilst PAT margins have declined from 17.7% to 13.8% over the same period. This 390 basis point margin contraction suggests the company has struggled to offset input cost inflation and competitive pressures through pricing actions or operational efficiencies.
Peer Comparison: Premium Valuation Amidst Moderate Fundamentals
Dabur India's positioning within the FMCG peer group reveals an interesting valuation dynamic. Trading at 50.50 times trailing twelve-month earnings, the company commands a premium to industry bellwether ITC Ltd. (16.80x) but trades at a significant discount to premium players like Nestle India (83.03x) and Tata Consumer Products (75.48x).
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Dabur India | 50.50 | 8.34 | 18.97 | -0.28 | 1.55 |
| ITC | 16.80 | 5.62 | 27.82 | -0.26 | 2.04 |
| Nestle India | 83.03 | 54.47 | 87.72 | 0.02 | 0.94 |
| Britannia Industries | 59.48 | 36.91 | 74.67 | 0.34 | 1.31 |
| Godrej Consumer | 61.04 | 9.75 | 14.97 | 0.12 | 1.73 |
| Tata Consumer | 75.48 | 5.39 | 6.78 | 0.01 | 0.75 |
The peer comparison reveals Dabur's fundamental challenge: the company trades at elevated multiples despite generating moderate returns on equity. Whilst Dabur's ROE of 18.97% is respectable, it significantly trails premium peers like Nestle India (87.72%) and Britannia Industries (74.67%). Even ITC, trading at a much lower P/E multiple, generates superior ROE of 27.82%.
Dabur's price-to-book value of 8.34x appears reasonable compared to the peer group average of approximately 20x, suggesting the market recognises the company's solid but unspectacular returns profile. The company's dividend yield of 1.55% positions it competitively within the sector, reflecting a consistent dividend payout policy supported by strong cash generation.
The valuation premium appears predicated on Dabur's leadership in the Ayurvedic and natural products segment, its debt-free balance sheet, and consistent dividend track record. However, the elevated PEG ratio of 48.32 raises questions about whether the current valuation adequately reflects the company's modest growth trajectory of 7.96% sales CAGR over five years.
Valuation Analysis: Expensive Multiple Demands Growth Acceleration
At the current market price of ₹515.00, Dabur India trades at a P/E ratio of 50.50 times, representing a significant premium to its five-year average and the broader FMCG sector P/E of approximately 52 times. The company's enterprise value-to-EBITDA multiple of 37.34x and EV-to-EBIT of 46.24x further underscore the premium valuation investors are willing to accord to the Ayurvedic products leader.
The valuation grade of "Expensive" reflects these elevated multiples. Historical analysis shows the stock has oscillated between "Expensive" and "Very Expensive" categories over recent months, with brief periods of "Does Not Qualify" status, indicating valuation volatility and market uncertainty about the company's growth prospects.
The company's PEG ratio of 48.32 presents a concerning picture. This metric, which adjusts the P/E ratio for growth, suggests investors are paying approximately 48 times for each percentage point of earnings growth—a level that appears difficult to justify given Dabur's five-year EBIT growth of just 3.58% annually.
The stock currently trades 10.71% below its 52-week high of ₹576.80 but remains 22.60% above its 52-week low of ₹420.05. This positioning suggests the market has moderated its expectations from the peak levels seen earlier in the year, but the stock hasn't experienced a meaningful valuation reset that would create a compelling entry point for value-conscious investors.
Valuation Concern: Growth-Valuation Mismatch
The disconnect between Dabur's elevated valuation multiples and its modest growth trajectory represents the primary investment challenge. For the current valuation to be justified, the company would need to demonstrate meaningful acceleration in both top-line growth and margin expansion—outcomes that appear uncertain given the competitive intensity in the FMCG sector and the company's recent performance trajectory.
Shareholding Pattern: Stable Promoter Base, Institutional Flux
Dabur India's shareholding pattern reflects a stable promoter base with marginal fluctuations in institutional holdings. Promoter holding stood at 66.23% as of December 2025, representing a minimal 0.01% sequential increase from September 2025's 66.22%. The promoter group, led by the Burman family through various investment vehicles, has maintained consistent ownership around the 66% level, providing governance stability.
| Quarter | Promoter | FII | MF | Insurance | Other DII |
|---|---|---|---|---|---|
| Dec'25 | 66.23% | 10.05% | 7.28% | 9.67% | 1.43% |
| Sep'25 | 66.22% | 10.89% | 8.04% | 7.99% | 1.37% |
| Jun'25 | 66.22% | 11.85% | 7.02% | 7.71% | 1.51% |
| Mar'25 | 66.27% | 12.68% | 6.23% | 7.23% | 2.22% |
| Dec'24 | 66.26% | 13.27% | 6.20% | 6.59% | 2.13% |
Foreign Institutional Investor (FII) holdings have witnessed a notable declining trend, falling from 13.27% in December 2024 to 10.05% in December 2025—a cumulative reduction of 322 basis points over four quarters. This sustained FII selling, including an 84 basis point decline in the most recent quarter, suggests foreign investors have been reducing exposure to Dabur, possibly due to concerns about growth visibility or attractive opportunities elsewhere.
Conversely, insurance companies have significantly increased their stake, rising from 6.59% in December 2024 to 9.67% in December 2025. The most recent quarter saw a substantial 168 basis point increase in insurance holdings, indicating domestic institutional investors view Dabur as a defensive, dividend-yielding holding suitable for insurance portfolios.
Mutual fund holdings have fluctuated within a narrow range, standing at 7.28% in December 2025 after declining 76 basis points from September 2025's 8.04%. The mutual fund community appears to be taking a cautious stance, neither aggressively accumulating nor wholesale exiting their positions. With zero promoter pledging and total institutional holdings of 28.44%, Dabur maintains strong governance credentials despite the recent FII selling pressure.
Stock Performance: Consistent Underperformance Versus Benchmark
Dabur India's stock performance over multiple time horizons reveals a pattern of consistent underperformance against the Sensex benchmark. Over the past year, the stock has delivered negative returns of 0.66% compared to the Sensex's 7.88% gain, resulting in a negative alpha of 8.54%. This underperformance extends across longer time frames, with the stock generating negative alpha of 18.31% over two years and 47.67% over three years.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -1.94% | +0.31% | -2.25% |
| 1 Month | +5.33% | -2.51% | +7.84% |
| 3 Months | +1.38% | -2.86% | +4.24% |
| 6 Months | -0.92% | +1.51% | -2.43% |
| YTD | +2.32% | -3.11% | +5.43% |
| 1 Year | -0.66% | +7.88% | -8.54% |
| 2 Years | -3.54% | +14.77% | -18.31% |
| 3 Years | -8.51% | +39.16% | -47.67% |
| 5 Years | -0.05% | +78.38% | -78.43% |
The recent performance shows some stabilisation, with the stock delivering positive returns of 5.33% over the past month and 2.32% year-to-date, both outperforming the Sensex during these periods. This suggests potential near-term momentum, though whether this represents a sustainable trend reversal or merely a tactical bounce remains uncertain.
From a technical perspective, the stock currently exhibits a "Mildly Bullish" trend, having transitioned from "Mildly Bearish" on January 2, 2026. The stock trades below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, indicating weak technical momentum despite the recent trend change. The MACD indicator shows bullish signals on both weekly and monthly timeframes, whilst RSI remains neutral, suggesting the stock lacks strong directional conviction.
The stock's beta of 1.20 indicates higher volatility than the broader market, with annualised volatility of 20.02% compared to the Sensex's 11.23%. This elevated volatility, combined with negative risk-adjusted returns of -0.03 over the past year, classifies Dabur as a "Low Risk Low Return" investment—a characterisation that reflects the stock's defensive FMCG nature but disappointing absolute performance.
Investment Thesis: Quality Business, Challenging Entry Point
Dabur India's investment thesis rests on several enduring strengths: leadership in the Ayurvedic and herbal products segment, a diversified portfolio spanning hair care, oral care, health care, and foods, a fortress balance sheet with net cash position, and consistent dividend payments supported by an 80.21% payout ratio. The company's quality grade of "Good" reflects these fundamental strengths and long-term financial stability.
However, the investment case is complicated by several factors. The company's five-year sales growth of 7.96% and EBIT growth of just 3.58% indicate mature business dynamics with limited growth visibility. Operating margins have compressed from over 20% in FY21-FY22 to 18.4% in FY25, suggesting ongoing profitability pressures. Most critically, the stock trades at expensive valuation multiples—50.50x P/E and 37.34x EV/EBITDA—that appear difficult to justify given the growth trajectory.
The proprietary Mojo score of 65/100 places Dabur in "HOLD" territory, reflecting this mixed picture. The score acknowledges the company's high ROE of 18.97%, strong institutional holdings, and positive short-term financial trend, but penalises the expensive valuation (PEG ratio of 48.32), modest long-term growth, and consistent benchmark underperformance.
Key Strengths & Risk Factors
Key Strengths
- Market leadership in Ayurvedic and herbal products with established brands like Chyawanprash, Honey, and Vatika
- Fortress balance sheet with net cash position (debt-to-equity of -0.28) and zero promoter pledging
- Strong return on equity of 18.97% and return on capital employed of 23.23%, indicating efficient capital allocation
- Exceptional interest coverage of 28.90x, providing financial flexibility for growth investments
- Consistent dividend payer with 80.21% payout ratio and 1.55% yield, appealing to income-focused investors
- Diversified product portfolio across hair care, oral care, health care, skin care, home care, and foods
- High institutional holdings of 28.44%, reflecting professional investor confidence
Key Concerns
- Expensive valuation with P/E of 50.50x and PEG ratio of 48.32, difficult to justify given growth rates
- Modest five-year sales growth of 7.96% and EBIT growth of just 3.58%, indicating mature business dynamics
- Operating margin compression from 20.9% in FY21 to 18.4% in FY25, reflecting profitability pressures
- Consistent underperformance versus Sensex across multiple time horizons (negative alpha of 8.54% over one year)
- Declining FII holdings (down 322 bps over four quarters), suggesting foreign investor scepticism
- Sequential revenue and profit decline in Q2 FY26, though partially attributable to seasonality
- Intensifying competition from both traditional FMCG players and emerging Ayurvedic specialists like Patanjali
Outlook: What to Watch
Positive Catalysts
- Sustained revenue growth acceleration above 10% YoY, indicating market share gains
- Operating margin expansion back towards 20% levels through pricing power or cost efficiencies
- Successful new product launches in high-growth categories like immunity and wellness
- Market share gains in core categories like hair care and oral care
- Increased institutional buying, particularly FII re-accumulation
Red Flags
- Further sequential revenue or margin decline in Q3 FY26 beyond normal seasonality
- Continued FII selling pressure indicating loss of foreign investor confidence
- Market share losses in key categories to competitors like Patanjali or HUL
- Operating margins falling below 18%, suggesting structural profitability challenges
- Valuation re-rating downward if growth fails to accelerate
The Verdict: Quality Business, But Wait for Better Entry
Score: 65/100
For Fresh Investors: Avoid initiating positions at current levels. Whilst Dabur represents a quality business with strong fundamentals, the expensive valuation (50.50x P/E) and modest growth trajectory (7.96% sales CAGR) offer limited margin of safety. Consider accumulating only on meaningful corrections towards ₹450-470 levels, which would improve the risk-reward profile.
For Existing Holders: Continue holding given the company's defensive characteristics, consistent dividend payments, and strong balance sheet. However, consider booking partial profits if the stock rallies towards ₹550-570 levels, as the valuation-growth mismatch limits significant upside potential from current levels.
Fair Value Estimate: ₹480-500 (7% downside from current levels)
Dabur India remains a fundamentally sound business with market leadership in Ayurvedic products and a fortress balance sheet. However, the combination of expensive valuation multiples, modest growth rates, margin pressures, and consistent benchmark underperformance suggests limited upside potential at current levels. The stock merits a HOLD rating for existing shareholders but does not offer a compelling entry point for fresh capital deployment.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. All investments carry risk, including the potential loss of principal.
