Prabhudas Lilladher's research report on Dabur India
We are cutting FY21 and FY22 EPS estimates by 4.0% and 1.9% following lower than expected sales and profitability in 4Q20 and significant impact in 1Q21. Dabur has adopted aggressive approach in the current COVID scenario with launch of a slew of immunity boosters, Juices and Milkshake and a new shampoo and Covid care products (Hand, Surface sanitizer, COVID kit and Veggies wash etc.), which will help neutralize the COVID impact to some extent. Dabur is positive on rural demand revival given large scale migration, however we believe that overall impact on demand would be negative given large scale erosion in pricing power. We estimate just 1.5% EPS growth in Fy21 and 10.7% CAGR over FY20-22. While the endeavor to drive growth and invest gains in business is positive, sustained momentum in new launches post 1Q21 needs to be watched out for. We believe any significant acquisition beyond its traditional strongholds would be positive.
We value the stock at 40xFY22 EPS to arrive at target price of Rs422 (Rs431 based on 40xFY22 EPS earlier). Retain Hold given rich valuations.
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