Broker's call: Dabur India (Buy)

CMP: ₹401.4

Target: ₹530-550

Technical rationale: a) Stock is in long-term uptrend from ₹300 levels; b) Recently it corrected from ₹490 levels and got support at ₹360; c) We expect in the short term, the price will continue its long term uptrend towards ₹530 levels; d) Consolidated levels at ₹360 will hold as medium-term support.

Fundamental rationale: a) Dabur India is one of India’s leading FMCG company and leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. The company’s FMCG portfolio includes five flagship brands with distinct brand identities; b) India business accounts for 72.1 per cent of the company’s revenue. Domestic revenue break ups were Hair care (21.1 per cent), Foods(18 per cent), Oral care(17.3 per cent), Healthcare Supplement(17.2 per cent), OTC & Ethicals (8.7 per cent), Home care (6.9 per cent), Digestives (5.7 per cent), Skin(5.1 per cent). c) Dabur has immense scope to shift the dependency from wholesale to direct distribution even with the company’s intention to widen direct reach from 10-12 lakh outlets in FY19.

Dabur continues to leverage its Ayurveda appeal by expanding its Ayurveda range. In oral care, with its naturals range continuing to grow ahead of non-naturals and competition from Patanjali now stabilised, Dabur is regaining its lost market share. It intends to launch a slew of innovations, leveraging its Ayurveda range and increasing its contribution from 60 per cent now to 75 per cent of domestic sales by 2020.

Dabur’s Revenue to grow at a CAGR of 9 per cent in FY18-20E mainly driven by the new launches. EBIDTA Margins are expected to be stable 21 per cent over FY 18-20.

Risks: Poor rural demand, keener competition, a steep input-cost rise and changes in consumer taste and preference.

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