Dabur’s management had previously indicated ad spends would increase from traditionally low levels to boost growth, which is evidently happening.
Dabur India shares gained nearly 3 per cent to trade at Rs 530 apiece on BSE, after gaining 5 per cent so far this week. Homegrown FMCG company reported a 19.62 per cent on-year increase in consolidated net profit in the July-September quarter. The company had posted a consolidated net profit of Rs 403.64 crore in the corresponding quarter of the preceding year. Dabur India said the company reported strong growth in its performance for the second quarter of 2020-21, backed by sustained efforts in driving demand for its ayurvedic healthcare, hygiene and nutrition products, coupled with strong innovation to meet the emerging consumer needs in the wake of the COVID pandemic. “Overall, numbers were above our expectation. We are bullish on Dabur India as it is beneficiary of Covid due to increased sales of immunity-related products and increasing distribution reach of the company,” said Keshav Lahoti, Associate Equity Analyst, Angel Broking Ltd.
Dabur India’s revenue from operations stood at Rs 2,516.04 crore in the second quarter of the current fiscal as against Rs 2,211.97 crore in the year-ago period, an on-year growth of 13.74 per cent. Motilal Oswal has maintained a buy rating to it with a target price of Rs 605, implying an upside of 17 per cent. The brokerage said that Dabur’s management had previously indicated ad spends would increase from traditionally low levels to boost growth, which is evidently happening.
Analysts at Emkay Global Financial Services have ‘hold’ rating to the stock as they believe that Dabur has delivered an impressive performance with the domestic business posting 18 per cent sales growth, led by 17 per cent volume growth. The report noted that growth outlook has improved on the back of strong traction in healthcare and improving growth across home and personal care HPC and increased aggression in portfolio and distribution expansion.
The company is using new launches to expand its distribution pan-India. Dabur is expanding production capacity for Chyawanprash with a new facility in Madhya Pradesh. HDFC Securities said that rich valuation does not offer the right entry-level at CMP. The brokerage firm has given reduce rating to it, with a revised target price of Rs 470 apiece, downside of nearly 9 per cent from the previous close.
Yes Securities highlighted that stock is currently trading at a rich multiple 48x/42x FY22/23E earnings, which indicates that future stock returns will predominantly be a function of earnings growth, which should be best‐in‐class for the next 2‐3 years. “With multiple engines like healthcare, oral care, shampoo firing at the same time coupled with multiple margin levers and aggressive innovation, Dabur looks set to deliver 15‐20% earnings growth and remains a strong buy on dips stock despite seemingly rich valuations,” Yes Securities said.