Accumulate Dabur India; target of Rs 647: Prabhudas Lilladher

Prabhudas Lilladher's research report on Dabur India

We retain Accumulate on Dabur given a steady performance with 2% volume growth, 7.5% rural sales growth and market share gains across portfolio. We believe Dabur is building blocks to sustain double digit growth led by 1) sustained increase in direct rural reach 2) GTM initiatives in Ecom and Modern trade and 3) innovations across portfolio. Dabur has increased pace of new launches in large categories like Drinks and Milk Shakes, Superfoods, Chawyanprash, Pure Herbs (OTC) where it has right to win given strong brand recall and lineage over the years. Dabur has cut adspends to sustain margins (like other FMCG players) but that does not seem to be a sustainable trend given the pipeline of new launches in large categories.

Outlook

We expect near term volatility in margins although market share gains in core categories and new lunches around core infuse confidence. Dabur trades at 38.1xFY24 EPS after factoring in 18% EPS CAGR over FY22-24 with 24% ROE and 50% dividend payout. Retain accumulate with 12 month DCF based target price of Rs647 (unchanged). However, expect back ended returns given sectoral rotations, high inflation and re-rating over time.