Target: ₹705
CMP: ₹553.45
We reiterate our Buy rating on Dabur with a target price of ₹705. Our investment thesis on Dabur is premised on the following key attributes: highest topline growth visibility among peers; consistent market share gains across categories; and potential to record even faster earnings growth post-completion of its ongoing investment phase.
The key catalysts that underpin a sustained double-digit topline growth for Dabur include: an impressive performance in the Ayurvedic healthcare space; an encouraging output from the Power Brand strategy; an improving outlook for the F&B business; and a host of new launches by the company.
In fact, Dabur is on track to deliver a double-digit sales growth in FY22, a feat achieved in two out of three years since the then new CEO took over.
The recent stock price correction from its peak offers an attractive entry point in our opinion with the stock now trading at 39x FY24 P/E, a discount of 15 per cent/20 per cent to its historical three/five-year averages, respectively.
Dabur is among our top two picks in the Staples space along with Godrej Consumer (GCPL).
Downside risks to our investment case include: a persistent and intensified rural slowdown; a spike in material cost pressures; higher-than-expected moderation in the demand for herbal health products as the pandemic recedes; and a reversal in recent market share gains.