Fundamental Radar: Defensive pick! This FMCG stock with a Mcap of nearly Rs 1 lakh cr could hit fresh record highs in 2023

The FMCG stock is trading with a Mcap of over Rs 97000 cr as on 7 November. It hit a record high of Rs 620 on 8 November 2021. It is probably just 11% away from its recent peak.

with a 1-year beta, a measure of volatility when compared to the market or an index, of just 0.6 makes it a defensive play, Trendlyne data showed.
has a wide range of products and excellent brand management based on ayurveda/natural format Dabur able to create a unique market positioning in India and across geographies.

Fundamental Radar: Dabur India a long-term buy for a target of Rs 675, recommends Kaustubh Pawaskar

“Dabur’s revenues and PAT is expected to grow at CAGR of 14% and 18.5% over FY2022-25. The company has underperformed in the last year and is currently trading at 38x its FY2024E earnings. We have a Buy rating on the stock with a price target of Rs675,” Kaustubh Pawaskar, Deputy VP – Fundamental Research at Sharekhan by BNP Paribas, said.

It has a leading position in categories such as Packaged Juices, Chyawanprash, Honey, Facial bleach and Air fresheners.

Long term investors who are looking to add defensive stocks to their portfolio can look at Dabur which could well surpass its current high in the next 12 months, suggest experts.

“Dabur’s revenues and PAT is expected to grow at CAGR of 14% and 18.5% over FY2022-25. The company has underperformed in the last year and is currently trading at 38x its FY2024E earnings,” Kaustubh Pawaskar, Deputy VP – Fundamental Research at Sharekhan by BNP Paribhas, said.

Its revenues and PAT grew at CAGR of 8 and 11% respectively over FY2012-22. “We have a Buy rating on the stock with a price target of Rs675,” recommends Pawaskar.

If we look back, the performance in the last ten years was impacted by multiple factors such as the introduction of GST, Demonitisation, and two years of uncertainties caused by the pandemic.

The stock has fallen more than 10% in a year, and up a little over 15% in 3 years.

But, under the new leadership of Mohit Malhotra the company is focusing on achieving consistent double-digit revenue and earnings growth in the medium to long term, suggests Pawaskar.

The key growth levers such as 1) Market share gains in key categories 2) New products launches 3) expansion reach into rural markets and 4) Playing on multiple trade platforms coupled with improved product mix and efficiencies to drive OPM – makes Dabur an attractive play.

Sustained new product launches, scale-up in distribution (especially in the rural markets) and higher media and promotional activities aided Dabur to consistently improving its market share in the last 10 years.

“It regained its lost market share in one of the highly penetrated category toothpaste while in beverages it has witnessed consistent improvement in the domestic market,” said Pawaskar.

Acquisition:

The company has recently acquired Badshah Masala brand, which will help its food business to go up to Rs500crore by FY2025.

Further recent plans of capacity expansion will help in adding Rs900crore by FY2027 (at 3x asset turnover ratio).

E-commerce contribution has increased to 10% from 2-3% prior to pre-covid levels. The company is focusing on e-commerce platform to launch new products and test market to launch in other markets. New product contribution on e-commerce platform stands at 11%.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)