Emkay Global Financial recommended hold rating on Dabur India with a target price of Rs 500 in its research report dated July 30, 2020.
Emkay Global Financial's report on Dabur India
Dabur’s Q1 sales/PAT declined 13%/11% and came in marginally below expectations on a 22% fall in the international business. The domestic business performed better, with 8% sales decline and 4% PAT growth on strong growth in the Healthcare segment. Cost reduction was better than peers with a 14% decline in domestic overheads. This, along with a 22% fall in ad spends, led to EBITDA growth with a 260bps margin gain. Cost efficiencies and lower competitive spends continue to offer a positive margin outlook. Strong demand for healthcare products, a significant acceleration in new product launches (6% of sales in Q1) to meet current consumer needs and some normalization seen in its discretionary portfolio should drive a faster recovery in the coming quarters, in our view.
Outlook
We like management’s aggressive efforts and initiatives to drive recovery and growth, but await a better entry point as current valuations at 43x FY22E EPS restrict upsides. Maintain Hold with a revised TP of Rs500 (Rs465 earlier), based on 40x Sept-22E EPS.
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