Emkay Global Financial has given Hold recommendation for Dabur India with a target price of Rs. 600 in its research report issued on Nov 03, 2021
Emkay Global Financial’s report on Dabur India
Dabur reported a healthy Q2 performance with 12% sales growth (2% ahead of estimates). The domestic FMCG business grew by 12% (2-yr CAGR of 15%), with 10% volume growth on strong growth in the Foods segment. EBITDA/PAT grew 9%/5% (1%/2% miss). Management’s aggression on innovations remains high. It expects to clock double-digit domestic sales growth, driven by strong execution and hope of rural pick-up in the festive season. F&B outlook is strong, which is expected to offset the moderation in Healthcare. Input inflation is expected to stay elevated in the near term, impacting gross margins. However, the commentary indicated a stable operating margin outlook, led by further price hikes in H2, cost savings from Project Samriddhi and optimization of ATL spends.
Although a higher ETR moderates FY22 earnings, volume performance and growth initiatives offer a positive outlook. As the stock looks fairly valued at 50x FY23E EPS, we await a better entry point. Retain Hold with a revised Dec’22 TP of Rs600 (45x Dec-23E EPS).