Buy Dabur India; target of Rs 595: ICICI Direct
ICICI Direct is bullish on Dabur India has recommended buy rating on the stock with a target price of Rs 595 in its research report dated November 04, 2020.
November 07, 2020 / 01:40 PM IST
ICICI Direct's research report on Dabur India
Dabur India (DIL) witnessed splendid domestic volume growth of 16.8% led by immunity boosting, ayurveda & naturals product portfolio. Consolidated revenue grew 13.7% led by strong 17.9% growth in India business. International business saw muted growth on account of sluggish sales in MENA region. DIL is one of the biggest beneficiary of increased health awareness in a post-Covid world. Chyawanprash, Honey, OTC & Ethical products, oral care witnessed robust growth during the quarter. It was also able to leverage the e-commerce channel with 200% growth. E-commerce contributed 6% to sales. Given mixed trends in commodity prices, gross margins stayed flat. However, cost rationalisation initiatives led to savings in overhead & employee spends to sales by 163 bps & 30 bps, respectively. Contrary to the trend of low advertisement spend by other consumer companies, the company increased ad spends by 40.2% (152 bps higher) to support growth for newly launched products. Led by higher operating profit, net profit grew 19.6% to Rs 482.9 crore.
With strong tailwind from health and immunity products, DIL got the new structural growth levers. We believe the company would continue to witness strong growth in the medium term from these trends. Moreover, benign commodity cost & savings programme leaves enough scope to increase margins over the long term. We expect the company to witness earnings CAGR of 12.8% over FY20-23E. We value the stock at 50x FY23 earnings for the target price of Rs 595/share and maintain BUY recommendation.
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