1 August 2018 (19.6% on by underlying volume growth of 21% YoY (highest ever for a quarter; our (10.5% in CC terms). 19.3%), led by gross margin expansion of 70bp YoY to 49.6% and lower other expense (-120bp YoY to 10.7% of sales) and staff costs (-60bp YoY to 10.8%). Higher ad spends (+120bp YoY to 9.6%), however, restricted the expansion. (1) Rural wholesale is doing very well and was up 24% YoY while urban wholesale grew only 8% YoY; (2) Gross margins are unlikely to expand for the rest of the year owing to material cost increases. Changes to the model have resulted in reduction of 5.4%/2.7% in FY19E/FY20E EPS. Rural recovery is playing out well for DABUR but some of the sheen will be taken off by absence of any substantial and sustained recovery in the overseas businesses, which are one-third of sales.