The Hindu Business Line : Dabur India: Buy

Investors can take exposure to the Dabur India stock to capitalise on the upturn in the FMCG sector. Consumer spending on FMCGs appears to be in the initial stages of a cyclical upswing that is likely to last several years.

Dabur could report growth rates that are superior to the sector, due to a large brand portfolio and presence in nascent yet promising product categories. The stock trades at a priceearnings multiple of about 30 times trailing 12-month earnings, on par with Indian players and at a discount to Hindustan Lever.

Dabur India's key strength lies in the sheer breadth of its product portfolio in the FMCG space, rivalled only by Hindustan Lever. The company owns brands that span several categories - toothpastes, hair care, cosmetics, foods, health supplements and baby care. The recent addition of Balsara Hygiene Products adds home care to this impressive spread. The large basket of brands reduces the company's vulnerability to sluggish performance from one or two of its businesses.

With about half of its sales originating from the rural areas, it can also tap into the incipient revival in rural demand for FMCG products. Several of Dabur's new business forays have the potential to ramp up its size. Health supplements, fruit juices, home cleaning products and branded versions of generic products such as honey and rosewater hold promise. Growth rates could also receive a fillip from the increasing focus on modern trade formats, expanding distribution reach and a pan-India presence for its brands. With the addition of Balsara's brands, it reported a 26 per cent growth in sales and 37 per cent growth in profit on consolidated operations in the first 9 months of 2005-06.

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