Broker's call: Dabur India (Buy)

| Updated on May 28, 2020

ICICI Securities

Dabur India (Buy)

CMP: ₹448

Target: ₹520

Dabur India Ltd (DIL) posted a dismal set of numbers with a 12.3 per cent decline in sales and 24.2 per cent dip in earnings. The results were impacted by a sharp dip in sales in March impacted by the lockdown. Though India business volume fell 14.6 per cent in Q4, even January-February volumes were growing at a slower pace of 4.6 per cent due to continued liquidity problems with trade channel.

Gross margins contracted 70 bps, employee spend to sales increased 100 bps, A&P spend to sales increased 80 bps, resulting in 260 bps contraction in operating margins and 23 per cent fall in operating profit. Health supplement (Chyawanprash, honey, glucose) sales declined 9.5 per cent. Hair care, home care, oral care and skin categories witnessed 20.2 per cent, 15.8 per cent, 18.4 per cent and 24.2 per cent contraction in sales during the quarter, respectively. Further, foods (juices) category also saw a 20.6 per cent dip in sales given disruption in pre-season sales.

Valuation & outlook: DIL seems to be trying to convert adverse circumstances into opportunity by leveraging Dabur brand in hygiene and healthcare themes. We expect flat sales growth in FY21 and strong 16 per cent recovery in FY22E considering its strong rural presence (targeting direct reach of 60,000 villages) that may see higher growth with migrants moving back and increase in government welfare spend. We maintain ‘buy’ with a target price of ₹520/share.

Published on May 29, 2020

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