Hold Dabur India; target of Rs 437: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Dabur India

Dabur has maintained a very cautious stand due to near term macro-economic headwinds led by 1) slowing down of MoM FMCG growth rate (13.2% in 2Q19 to 3.7% in July'19) 2) increased unemployment 3) liquidity concerns with the dealers and 4) floods in many states and curfew in J&K. Dabur has pinned its hopes on the early festival season (2Q v's 3Q last year), monsoons and the likely impact of government boost for Rural India. Distribution expansion and smaller SKU's are pushing rural sales for Dabur, which are growing ahead of Urban demand by 600bps (rural sales up from 44% to the 48%). Dabur shall be focusing only 8 power brands with innovations in existing brands with no new segment addition.

Outlook

We estimate 9.9% Sales and 13.7% PAT CAGR over FY19-21 and value the stock at 39xJune21 EPS to with a target price of Rs 437. Retain "Hold".

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