Buy Dabur; target of Rs 705: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Dabur

Driven by very strong growth in HPC and more so in F&B, DABUR’s 2QFY22 result comfortably beat our sales growth forecasts, even as Healthcare sales, as expected, slowed down on the back of a high base. Healthcare sales posted a 19% CAGR over a two-year period, and its medium-term prospects are attractive. Consolidated sales/volume growth of 12%/10% YoY in 2QFY22 on a growth of 14%/17% in the base quarter is truly remarkable. Gross/EBITDA margin was ahead of our expectation, leading to a double-digit beat on our operating profit estimate. From a near-term perspective, two factors distinguish DABUR from other Staples peers: a) its better performance and outlook on rural India, and b) dominant market share in its key categories, leading to a superior ability to pass on the ongoing material cost inflation. The company has taken requisite price increases in nearly 90% of its portfolio. - Good visibility v/s its peers on near-term topline and earnings, and a healthy long-term earnings opportunity deserves premium multiples. We maintain our Buy rating.

Outlook

Valuations at 48.8x FY23E EPS is not cheap, but the potential for earnings growth is much stronger going forward as the management initiatives underlined earlier yield benefits, leading to the sustaining of premium multiples. We maintain our Buy rating with a TP of INR705/share (50x Dec’23E EPS).

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