Add Dabur India Ltd For Target Rs.625 - ICICI Securities
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Expansion into adjacencies through power platform to drive faster growth
The theme for Dabur's analyst meet was ‘portfolio enhancement’. It provided a strategy to redefine core for younger India (stronger scientific claims, new-age formats, aspirational packaging) while boosting the total addressable market (TAM) by expanding into adjacencies through power platforms. In our view, its power platform strategy appears to increase business complexity (a key concern for consensus) which Dabur intends to manage through its organisational strengths. Driving premiumisation is unlikely to be an easy journey for Dabur (middle class and rural India positioned). In the short term, Mohit Malhotra (CEO) spoke about consistent rural recovery and urban demand getting stronger with improving gross margin being partially reinvested into ad spends. Maintain ADD
Increasing focus on ayurveda, again
Ayurveda is going through a transformation with an opportunity for Dabur to create an ecosystem for Ayurveda. Firstly, consumers are increasingly favouring natural alternatives (including ayurveda), and allopathic doctors are willing to prescribe a more holistic approach to patients backed by scientific evidence. Dabur being a dominant player in ayurveda has taken up the responsibility to make it attractive again. It has plans to spearhead this complementary medical approach through Dabur therapeutics focusing on increasing doctor coverage and advocacy (through strong scientific claims).
Redefine core for younger India
Dabur plans to increase the attractiveness of its portfolio for younger India through a) stronger scientific claims, b) increasing relevance through new-age formats, and c) aspirational packaging. In our view, contemporising the portfolio would be an easier journey while changing brand perception in consumer’s mind would be a much longer journey.
TAM enhancement through power platform architecture
Dabur has further plans to increase TAM by expanding into new adjacencies through power brands with continued focus to drive growth in its core. As a result, it has tripled its TAM over the last 4 years with pick-up in its innovation pace to 4% in FY23 from 1.4% in FY19. Addressing concerns on increasing business complexity may be a key driver to success.
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