Buy Dabur India; target of Rs 620: ICICI Direct

ICICI Direct's research report on Dabur India

Dabur India (DIL) continue to report robust results with 18.1% domestic volume growth led by strong traction in health supplement, oral care, OTC & ethical businesses. The company reported 16% consolidated revenue growth with 19.5% India FMCG growth & 13% international business growth. The higher penetration led growth continued in health supplement and oral care segments with 34.7% & 28% jump in sales, respectively. DIL raised its ad spends (170 bps higher) behind core & power brands, which, in turn, benefited most new launches under core brands. New products (launched in the last three quarters) contributing 4-5% to the sales now. The company maintained its gross margins at 50.4% (31 bps higher) while employee spends sustained at corresponding quarter level. DIL was able to save 113 bps overhead spends by cost rationalisation efforts in a post pandemic period. Operating profit increased 16.5% to Rs 574.2 crore. The company was able to maintain its operating margins at 21% despite higher ad-spends. PAT grew 23.7% to Rs 493.5 crore mainly on account of higher operating profit, lower interest cost & lower tax provisioning

Outlook

we expect 14.4% earnings CAGR in FY20-23E. We maintain BUY recommendation with a revised target price of Rs 620/share (earlier Rs 595).

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