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A large repertoire of FMCG (fast moving consumer goods) brands, a healthy pace of new launches and ability to manage margins amid volatile input costs make Dabur India a good addition to any long-term investor’s portfolio.

Successful forays into larger FMCG categories such as hair care and oral care, an expanding overseas presence and a makeover of its traditional consumer portfolio have helped Dabur manage a 16-per cent annual growth in sales and a 29-per cent growth in earnings over the past three years, well ahead of the FMCG sector average.

Despite superior growth prospects, the stock trades at a PE multiple of just 16 times its estimated earnings for 2009-10, at a discount to rivals such as Hindustan Unilever (22 times) and Nestle India (24 times).

Over the past two years, Dabur’s consumer care portfolio has been systematically overhauled through re-launches and brand extensions, even as fresh forays have been made into new categories such as hair, skin care and home care. The company’s hair and toothpaste brands have managed to gain significant market share in highly contested categories, suggesting that the ‘ayurvedic’ association has worked in their favour.

The launch of an ayurvedic skin care range by the end of this fiscal, recent foray into health drinks and expansion in the foods and fruit juices through low-priced packs, all hold potential to scale up earnings over the next couple of years.

Though rising commodity prices have curtailed margins for several players, Dabur India has managed these challenges well, holding on to its operating profit margins through strategic procurement and judicious price increases.

For the June quarter, Dabur managed 15.5 per cent growth in consolidated sales, with a 13.6 per cent growth in net profit. The slower pace of earnings growth can be attributed to losses from the nascent retail venture (Dabur now plans to ramp up this venture at a more measured pace) and inventory adjustments pertaining to re-launches in the oral care category.

Earnings growth may pick up pace from the next quarter, as the impact of recent price increases and launches reflect in profits.

The sharp decline in petroleum product prices over the past month, which trims the cost of packaging material, will also expand margins.

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