Reduce Dabur; target of Rs 433: HDFC Securities

HDFC Securities' research report on Dabur

Dabur’s 1QFY21 was broadly in line with a beat in domestic revenue. Consolidated revenue/EBITDA was down by 13/9% YoY (in-line) with domestic revenue/volume decline of 7/10% YoY (HSIE -13%). In domestic, HPC and Food portfolio saw 15% and 34% YoY decline while Healthcare recorded a strong 29% YoY growth (Honey and Chywanprash up by 69% and 7x YoY). Market share gain (across portfolio), rural growth (+1% YoY) and strong demand for healthcare products were the key highlights of the result. Performance in oral care (+1% YoY) was better than Colgate (-4%YoY), and the company gained market share in toothpaste. Juices remained under pressure as OOH consumption impacted LUPs. Ecommerce saw strong growth and revenue mix jumped to 5.6% (1.5% earlier). The international business saw a 22% YoY decline with massive impact in MENA and Egypt. Bangladesh clocked 14% cc growth (healthy growth for Marico too). Margins saw improvement aided by (1) lower consumer offers, (2) price increases and (3) heightened focus on cost rationalization. We expect a gradual recovery, aided by a healthy pick-up in rural and healthcare portfolio.

Outlook

We maintain our EPS for FY21/FY22/FY23. We value Dabur at 42x P/E on Jun-22E EPS and derive a target price of Rs 433. Maintain REDUCE.

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