Established in 1884, Dabur India Ltd. is India’s oldest and fourth largest FMCG Company with a total turnover of Rs. 7,806 Crores. It operates in key consumer product categories viz; Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods.
Valuation and view
We expect Dabur to benefit from the revival of its brand image and enhanced rural reach. It is also well placed to benefit from its innovative brand offerings. The company generates ~8% of free cash flow to sales each year and has been increasing earnings at 15%-20% annually over the past eight years. We expect the top-line to grow at a CAGR of 8% by FY17E.
At the current market price (CMP) of Rs. 277, the stock trades at a P/E multiple of 40.1x FY16E and 31.4x FY17E. We recommend ‘BUY’ with a target price of Rs. 344, assigning a forward P/E multiple of 39x, which implies a potential upside of ~24% to the CMP from 12 months perspective.
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