Buy Dabur; target of Rs 620: Motilal Oswal

Motilal Oswal's research report on Dabur

While Dabur reported consolidated sales growth of 25.3% YoY in 4QFY21, it was on a low base. Thus, the average sales growth momentum in the last two-years dipped to a more modest 6.5% in 4QFY21 from 8.9%/11.5% in 2Q/3Q. There will also be some impact from the slower-than-expected recovery in the Beverages business (15% of sales in FY21) due to the lockdowns impacting sales in the key summer season. Along with higher than anticipated tax rates, these factors have led to a 9.4%/6.9% cut in our FY22E/FY23E EPS.

Outlook

Given the long term earnings growth potential of the business, valuations at 43.2x FY23E do not appear expensive. We maintain our Buy rating, with a TP of INR620 per share (50x FY23 EPS).