Dabur India Ltd. share price target

Dabur has delivered in a tough environment as its initiatives are beginning to pay dividends. Mohit is focusing on (a) Scaling power brands (8 brands with 65% revenue mix) which have a large addressable opportunity and (b) Deeper rural penetration led by higher direct reach (targeting 55k villages in FY20). While beverage market share is at all time-high, recovery in growth is critical for Dabur to outperform. Our conviction in recovery in volume growth is led by pick-up in transfers of PM-kisan scheme, normal monsoons and favorable base. Dabur reported an in-line show amidst weak consumer demand in rural. Ex-foods, domestic volume growth of 7.4% is commendable. Mohits (new CEO) strategies and execution is visible in 1HFY20 performance wherein Dabur has outperformed the market (vs. riding with the tide). We raise estimates by 2-3% and value Dabur at 40x on Sep-21E EPS, arriving at a TP of Rs 511. Maintain BUY.

Dabur is taking initiatives on new product launches and distribution believe that quality of growth has not been good as large categories like Oral care and hair care are under pressure. In addition, Juices as a category is facing structural growth issues. Visibility in IBD remains hazy given growth...

2QFY20 consolidated sales grew 4.1% YoY to INR22.1b (v/s est. INR22.4b). EBITDA grew 8.6% YoY to INR4.9b (v/s est. INR4.8b). PBT grew 6% YoY to INR5b (v/s est. INR5b). Adj. PAT increased 15.5% YoY to INR4.4b (v/s est. INR3.9b)....

High concentration to rural to drive future growth Dabur derives 40-45% of revenue from rural sales vs 35% for the industry, which has led the company to grow at 20% sales CAGR over FY09-14 period. However, rural slowdown due to GST and demonetisation over last 4 years has resulted in a tepid topline growth of ~4% in the last 5 years. Though high base in FY19 and recent rural slackness may impact company's performance in FY20, we remain positive on long term growth prospects for Dabur. We believe that government would increase its measures to improve...

Co level initiatives are on track. We will be keen to see how Mohit will drive Dabur's large but under indexed portfolio. Revitalizing the strategy should fill the gaps in product/distribution/ communication. There are few low hanging fruits which Mohit will try to assess initially, resulting in a quick turnaround in performance. Rural tilt in sales mix means progress of monsoon (normal) and government initiatives are key (wage growth is muted). Our change in rating is based on medium term performance. We attended the analyst meet of Dabur India. We observed that Daburs strategy has turned aggressive (outperform market) vs. defensive (riding with the tide). Dabur headed by Mohit Malhotra (new CEO, joined Aug'18) is shaping up well. Mohit is taking the right steps which were required years ago. Dabur has always been admired due to its wide product range and strong rural play (45% rev mix). However, the co was performing below its potential. Extensive product range was limiting managements focus (defensive approach due to focus on many brands). Rural play (acceleration) has been more of a hope than a reality due to competition from regional players and entry of large players in upcountry markets. With the change in approach, we are confident that Dabur can outperform over the next 3-5 years. Current slowdown might impact near term performance but we expect a mean reversion for many brands over the next few years. We see a re-rating potential in Dabur. We are upgrading the target multiple to 40x (38x earlier) on Sep-21 EPS. Our TP...

Dabur has maintained a very cautious stand due to near term macro- Change in Estimates | Target | Reco economic headwinds led by 1) slowing down of MoM FMCG growth rate (13.2% in 2Q19 to 3.7% in July'19) 2) increased unemployment 3) liquidity...

9 September 2019 The new CEO believes that DABUR had deviated its focus from its core business over the past 15 years or so. Management believes that, unlike peers, not only does the company have strong domain knowledge, extensive sourcing of herbs and the widest collection of ancient manuscripts on traditional medicines, but also all-encompassing knowledge and a portfolio suitable for the core concepts of Ayurveda Ahaar, Vihaar and Aushadi (meaning Food, Habit and Medicine respectively). These will be the key focus areas which management believes were lacking vigor over the last five years, either in terms of pipeline or enthusiasm. In the four-year vision cycle (currently in the second year), it will not enter any new category, and thus, all innovations and renovations will be in existing categories of HPC, Healthcare and Food.

IBD margins expected to improve in 2HFY20 We met the management of Dabur to understand current demand scenario, vision and the long term business strategy. Dabur is looking at a sustainable 7-8% volume growth led by 1) strengthening and scaling up of the 8 power...

New CEO Mohit Malhotra intends to (1) Scale power brands (large addressable opportunity), (2) Increase direct reach in rural (55k villages in FY20 vs 48k now) and (3) Cost optimisation. Most of this is on track, but the rural tilt in sales mix does depend on the progress of the monsoon and government initiatives to revive the rural economy. In FY20, we expect (1) Recovery in gross margins (+70bps vs. -103bps in FY19) led by price hikes and benign input cost inflation, (2) Tight cost controls (A&P) and (3) Favorable operating leverage which will drive EBITDA margin by 181bps (-56bps in FY19). Dabur delivered a strong 1QFY20, despite weak macros and a high base. Cos distribution initiatives and concentrated brand focus have led to ~10% vol. growth, ~2x estimates. This is unprecedented, given Daburs track-record in difficult macros. We model near term softness, maintaining estimates despite the 1Q beat. Our TP of Rs 470 is based on 38x Jun-21E EPS. Maintain BUY.

Domestic business grew 10.5% driven by 9.6% growth in volume, supported by higher trade promotions. All key categories witnessed growth: health supplements (+19.6%), digestives (+18.2%), OTC (+13.1%), ethicals (+15.9%), hair oil (+12.1%), shampoo (+10.9%), oral care (+11.4%) and skin care (+12.1%). However, mere 1.5% growth in foods, on account of increased competitive intensity, was a disappointment. Volume growth was encouraging, considering a high base of 21%. However, the management has indicated a further slowdown in rural demand with growth in June...