All put together, we now estimate a 4% year-on-year growth in Dabur’s domestic business in FY21E, down from around 12% earlier.
Even as we expect Dabur’s portfolio to be relatively more resilient than its peers in the current and post-Covid environment, a couple of parts of the India portfolio could be challenged. GCC exposure could mean some weakness in the international portfolio as well. We factor these aspects into our model; FY21E/22E EPS forecasts see a 9%/6% cut. Retain ‘reduce’ in light of still punchy valuations; fair value (FV) unchanged at Rs 440 per share.
Primary sales of all companies have been hit on account of supply-chain disruptions. We are focusing more on the end-consumption impact. As long as end-consumption demand is intact, primary sales would come back. A good chunk (nearly 65%) of Dabur’s India portfolio — haircare, oralcare, homecare and health supplements — would not have seen any material dip in baseline end-consumption. Demand for health supplements (Chyawanprash, honey, etc) in particular may already have increased or could potentially increase. Other segments (skin, OTC/ ethical, digestives & fruit juices) would perhaps not be as resilient. Even the resilient segments could be challenged on growth on account of a potentially slower economy.
All put together, we now estimate a 4% year-on-year growth in Dabur’s domestic business in FY21E, down from around 12% earlier. Nearly 50% of Dabur’s international business comes from West Asia and Africa, where economies could come under significant pressure on account of weak crude prices and demand. Cross-currency movements add another layer of unpredictability. We now build in a 6% drop in Dabur’s international business in FY21E in rupee terms. For FY22E, we assume growth rebounding to 15% levels.
We have raised our Ebitda margin assumptions despite the sharp cuts in revenue growth forecasts. We do not expect much SOV pressure. Our revised EPS forecasts stand at Rs 10 and Rs 11.3 for FY21E and FY22E, respectively. DCF-based fair value stands unchanged at Rs 440 per share. ‘Reduce’ stays.