Buy Dabur India; target of Rs 615: Sharekhan

Sharekhan's research report on Dabur India

Dabur’s Q4FY2024 numbers were good with OPM coming in at 16.6% better than ours and the street’s expectations resulting in double-digit PAT growth. Consolidated revenues grew by 5.1% y-o-y to Rs. 2,815 crore, driven by 4.2% y-o-y volume growth (including Badshah) in the domestic market. In India business, the HPC segment grew by 8.7% y-o-y, F&B segment’s revenue stood flat y-o-y, while a delayed winter led to a 1.5% y-o-y decline in HC segment. International business grew by 12% y-o-y (CC terms) aided by good momentum in Egypt, Turkey and the SSA region. Softening of raw material inflation aided in 279 bps y-o-y expansion in gross margin to 48.6%.

Outlook

Dabur’s management expects performance to recover in the coming quarters with improving rural demand, and further aided by strategies in place to drive growth. Revenue growth in the medium term will be driven by market share gains, distribution network expansion, investments in power brands and new launches, while profitability is expected to improve, as raw material inflation eases and operating leverage improves. Stock has corrected by 12% from its 52-week high and trades at 44x/37x its FY2025E/FY2026E EPS. We believe valuations have almost bottomed-out and with an expected recovery in the rural demand, Dabur should post better performance in the coming quarters providing some boost to valuations. Hence, we maintain a Buy with a revised price target of Rs. 615.