PL Stock Report: Dabur India (DABUR IN) - Analyst Meet Update - Sustained focus on Innovations and NPD - Accumulate
Dabur India (DABUR IN) - Amnish Aggarwal - Head of Research, Prabhudas Lilladher Pvt Ltd
Rating: ACCUMULATE | CMP: Rs566 | TP: Rs600
Analyst Meet Update - Sustained focus on Innovations and NPD
Quick Pointers:
♦ Healthcare/Home & Personal Care projected revenue at ~Rs50/70bn by FY28.
♦ IBD targets double-digit constant currency growth with GM improvement of 300bps and EBITDA margins of 20%+.
We attended DABUR’s Capital Markets Day 2023 wherein the company’s CEO and divisional heads presented their medium term strategy. DABUR reiterated plans to 1) grow power brands into power platforms 2) premiumize the portfolio 3) enter into new categories and increase TAM (3.2x since 2019) and 4) expand into new variants and formats. Such efforts have yielded results over FY19-23 with market share gains across 90% of the portfolio, revenue growth of high-single digit and increase in share of innovations to 4% (1.4% in FY19). We believe sustained innovation and launches in core segments will help achieved double digit sales growth.
Inflationary headwinds have largely come off and Dabur is looking at increasing ad-spends from 5.6% (FY23) to earlier levels (gradually) to support brands. Recovery in rural markets is a key to accelerate sales growth, as this segment reaps 50% of revenues. We believe scalable opportunities in Badshah, Beverages, new launches like baby care and brand extensions hold key to medium term growth. Moreover focus on cost reductions through higher freight optimization, lower distance to market, multiple vendors for raw material/cartons etc. will help remove costs from the system and improve profitability. We estimate 15.4% EPS CAGR over FY23-25E and arrive at DCF based target price of Rs600 (45.6xJun25 EPS). Dabur trades at 43.0x Jun25 EPS with 21.2% ROE and 50% dividend payout. Retain ‘Accumulate’.