Dabur India share price hits 52-week high after Q2 earnings; what should investors do?

Shares of Dabur India gained more than a percent to hit a fresh 52-week high of Rs 488.15 on November 6 after the company's September quarter earnings matched analyst expectations.

The stock gained around 30 percent in the last six months amid stable numbers. It was quoting at Rs 485.50, up Rs 4.00, or 0.83 percent on the BSE at 1029 hours IST.

Brokerage houses remained bullish on the stock and also raised target price after the company maintained its full-year volume growth guidance.

While maintaining outperform call on the stock, Credit Suisse raised target price to Rs 535 from Rs 490 per share (implying 11 percent potential upside from current levels) as earnings were in-line with volumes growing 4.8 percent and profit before tax rising 6 percent YoY.

"We remain positive over the medium term. The company has been transforming into an aggressive Ayurveda & naturals focussed player," the brokerage said, adding benign input costs and international business could help margin expansion in the second half of FY20.

Dabur India maintained its FY20 guidance of mid-to-high single-digit volume growth.

The company reported a 6.8 percent YoY growth in profit at Rs 403.6 crore in Q2FY20 which was impacted by a one-time loss of Rs 40 crore. Revenue during the quarter grew by 4.1 percent YoY while earnings before interest, tax, depreciation and amortisation (EBITDA) increased 8.5 percent and gross margin expanded 140bps YoY, but EBITDA margin contracted 10 bps YoY.

CLSA also has a buy call on the stock and raised price target to Rs 575 from Rs 515 (implying 19.4 percent potential upside from current levels) as results were ahead of its estimates led by a better margin.

"India volume growth at 4.8 percent reflected tough macro environment. Ex-foods growth was more respectable at 7.4 percent. Worst may be over as there has been sequential improvement," said the brokerage which continued to like company's portfolio and management strategy around growth.

Jefferies retained its hold rating on the stock with a target at Rs 480. "The company saw improved execution with thrust on innovation, product and format extensions. The slowdown in Patanjali's growth was a tailwind for Dabur. We remain on sidelines post recent downgrade." it said.

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