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Motilal Oswal Recommends Buy This Large Cap FMCG Sector Stock For Target Price Of Rs 660

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Motilal Oswal in its recent report on Dabur India Limited (DABUR) has given a buy call to the stock for potential gains of up to 23% with a target price of Rs 660/share. The brokerage in the report highlighted DABUR's pre-quarterly update for 2QFY23, which the company recently released. The company clocks mid-single-digit growth in 2QFY23; gains market share across its portfolio.

 

 Stock Outlook & Returns

Stock Outlook & Returns

The current market price (CMP) of the stock on Friday stood at Rs 540.15/share. It has delivered 5.72% negative return in the past 1 week and 5.63% in the past 1 month, respectively. Over the past 1 year, the stock has given 12.19% negative return. However, in the past 3 and 5 years, it gave 24.88% and 70.19% positive returns to investors.

Its 52-week low level is Rs 482.25 recorded on 17 June 2022, and the 52-week high is Rs 632 recorded on 18 October 2021, respectively. This large-cap stock is a major FMCG sector company with a market capitalisation of Rs 95,699.88 crore.

Here are the key highlights of the DABUR pre-quarterly update for 2QFY23: 

Consumption
 

Consumption

Demand was weak across categories due to unprecedented inflation in 2QFY23. Consumption in urban India was driven by modern trade and e-commerce, which saw double-digit growth. Rural markets witnessed liquidity pressures. The management expects consumption to grow in 2HFY23 on the back of moderating inflation and demand from the festive season.

Business

Business

India business 

The management expects revenue to grow in mid-single digits. It expects the Food and Beverages category to witness double-digit growth. The Home Care and Personal Care category is expected to witness mid-single digit growth. The Healthcare segment is expected to witness a muted performance. However, three-year CAGR will be near double-digits.

International business 

On a constant currency basis, the international business is expected to grow in double-digits. The currency devaluation in Turkey and Egypt continued, thus impacting translated growth.

Consolidated

Consolidated

The management expects consolidated revenue to grow in mid-single digits. It gained market share in most segments in the domestic as well as international market. Gross margin will be under pressure due to peak inflation in 2QFY23. It expects operating margin to contract by 150-200bp YoY, but expand QoQ.

Valuation and view

Valuation and view

The brokerage said, "The medium-term and structural narratives on revenue growth are highly attractive, led by the initiatives taken by the new CEO in recent years on power brands, distribution, launches, and better analytics. Consequently, FY23 is likely to be the fourth year, out of five, of double-digit sales growth. As the impact of investing in these initiatives abates, DABUR's margin is likely to expand in FY24."

It added, "Its sales visibility in the near term is better than its peers. Coupled with higher pricing power v/s its peers, the visibility on DABUR's earnings is better. We maintain our Buy rating with a TP of INR660 (45x Sep'24E EPS)."

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.

 

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