Dabur India - Sustained Focus On Innovations, New Product Development: Prabhudas Lilladher

Prabhudas Lilladher Report

We attended Dabur India Ltd.'s Capital Markets Day 2023 wherein the company’s Chief Executive Officer and divisional heads presented their medium term strategy.

Dabur reiterated plans to-

1. grow power brands into power platforms,

2. premiumise the portfolio,

3. enter into new categories and increase total addressable market (3.2 times since 2019) and

4. expand into new variants and formats.

Such efforts have yielded results over FY19-23 with market share gains across 90% of the portfolio, revenue growth of high-single digit and increase in share of innovations to 4% (1.4% in FY19).

We believe sustained innovation and launches in core segments will help achieved double digit sales growth. Inflationary headwinds have largely come off and Dabur is looking at increasing ad-spends from 5.6% (FY23) to earlier levels (gradually) to support brands.

Recovery in rural markets is a key to accelerate sales growth, as this segment reaps 50% of revenues. We believe scalable opportunities in Badshah, Beverages, new launches like baby care and brand extensions hold key to medium term growth.

Moreover focus on cost reductions through higher freight optimisation, lower distance to market, multiple vendors for raw material/cartons etc. will help remove costs from the system and improve profitability.

We estimate 15.4% earnings per share compound annual growth rate over FY23-25E and arrive at discounted cash flow based target price of Rs 600 (45.6 times June-25 EPS).

Dabur trades at 43.0 times June-25 EPS with 21.2% return one equity and 50% dividend payout. Retain ‘Accumulate’.

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