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Motilal Oswal
Dabur (Buy)
Target: ₹600
CMP: ₹498.95
Dabur has highlighted details from Project RISE (Regional Insights and Speed in Execution), an analytic-based project for capturing regional market opportunities—its own version of the cluster-based approach that has served some consumer peers very well over the past few years. This, once again, highlights the new found nimbleness at Dabur.
Dabur has implemented a Continuous Replenishment System (CRS) to manage its inventory better. It has been able to reduce the pipeline inventory by almost five to six days. In the Q1-FY21 call, the company further highlighted that it intended to reduce pipeline inventory by another four to five days going forward. This would mean the near-halving of pipeline inventory.
The structural and medium-term narrative on topline growth is turning highly attractive, led by strong traction in the profitable Healthcare business and an attractive rural growth outlook, with nearly 48 per cent of Dabur's domestic sales coming from rural.
High near-term valuations appear justified at this initial stage of structural turnaround, which could potentially result in nearly 20 per cent EPS growth following the investment phase for the current year.
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