Dabur’s analyst meet built on the renewed aggression mindset and the growth vectors highlighted in Q1FY19, including accelerated launch mome-ntum (in existing categories), distrib-ution infrastructure expansion (across channels), optimised media strategy, regionalisation (cluster-based market-ing approach) and investments in management bandwidth.
Underlying confidence on delivering double-digit volume growth for remaining M9FY19 was high led by rural-led demand uptick. Margin guidance was guarded for the near term, but positive (modest 50 bps+ expansion each year) over the medium term. Raise our EPS estimate by 2% and revise our TP to Rs 550 (from Rs 480), as we roll over to Sept-20 and raise our target P/E multiple to 47x due to better volume-led growth visibility. Retain BUY rating. Dabur is our preferred pick in the staples space. Management highlighted impro-ved confidence on delivering low-teen volume growth for FY19 (double-digit volume growth for balance of FY19) aided by moderation in competitive intensity (Patanjali-led), benefits of investments in infrastructure building (Project Buniyaad and Project Lakshya to give operational and service level tailwinds respectively) and underlying demand tailwinds (rural-led) validated by Nielsen’s recent off-take data (indica-tes 12% volume growth and 15% value growth for FMCG industry in July 2018).
Management reinforced the change in mindset towards aggression in gain-ing and defending share at any cost; a welcome change in our view. It highlig-hted multiple examples including defen-ding hair oils with flanker brands, succe-ssfully ramping up growth in CNO via value offering and garnering higher share in juices via effective response to higher competitive intensity. To sum up, management’s strategic medium-term direction — defend core, attack where-ver opportunity through disruption and buy out brands which are scalable, high margin and profitable for future growth.