Buy Dabur India Ltd For Target Rs.745 - ICICI Direct
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Expanding addressable market…
About the stock: Dabur India (DIL) is one of the biggest FMCG companies with a presence in Ayurveda based products across categories. The company has a dominant market share in health supplement, OTC & ethical products, hair oils & Juices. Moreover, it is continuously gaining market share in oral care category.
The company has a total distribution reach of 6.9 million retail outlets with direct reach of 1.3 million outlets. It would increase direct distribution to 1.5 million outlets in the next two years
Dabur also derives ~50% of its sales through rural regions with a presence in more than 80,000 villages
Q3FY22 Results: Dabur reported healthy results with 7.8% revenue growth
Sales were up 7.8% YoY aided by 5% pricing & 2% volumes growth
EBITDA was at | 627.5 crore, up 9.3% YoY, with margins at 21.3%
Consequent PAT was at | 504.4 crore (up 2.2% YoY)
What should investors do? Dabur’s share price has given 107% return in the last five years (from | 268 in February 2017 to | 556 in February 2022)
We maintain our estimates with expected strong growth propelled through new product, rural distribution & Ayurveda, naturals consumption tailwind
We continue to maintain our BUY rating on the stock
Target Price and Valuation: We value the stock at | 745 on ascribing 55x FY24 earnings multiple
Key triggers for future price performance:
Significant shift in consumption towards healthier, natural & Ayurveda based products would be driving growth for the company
Increasing the addressable market by diversifying in categories like fruit drinks, health foods (under real brand), herbs & baby products under Dabur brand and extending Chyawanprash, Honey into new variants
Continuing extensive rural distribution expansion
Alternate Stock Idea: We also like Marico in our FMCG coverage
Robust growth in foods, digital brands portfolio. Likely to maintain margins in the longer run with eventual normalisation in commodity prices
We value the stock at | 550 on ascribing 45x FY24 earnings multiple
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