Dabur IN | Stunted Growth and Shifting Strategies Put Dabur In a Fix (Detailed Version)

1.2k Views07 Mar 2019 19:41

SUMMARY

This insight is jointly prepared by Nitin Mangal and Pranav Bhavsar.

Either Dabur India Ltd (DABUR IN) should change the crystal ball or those responsible for gazing at it. Going by its trajectory of strategies in the recent past, the narrative that emerges is that of confusion. Confusion has been a constant about whom Dabur perceived its competitors, its perception of the market while the disruptors reigned and what is and what should be its core strengths.

In this insight, we find Dabur heading to hibernation in summers. We believe this confused state of mind at Dabur will lead to lower than expected growth rates and an impact on margins. Our arguments are based on in-depth analysis of over 3 years of conference calls, past 5 year financial statements, competitors balance sheets and primary research covering different parts of the country. Our base case FY 21 EPS is 21% lower than consensus estimates and a potential aggressive case EPS is 26% lower than consensus. We argue for a 35x forward multiple giving us a target price of INR 322 for the base case and an aggressive case target price of INR 305 indicating a potential 26% & 30% downside from the latest close price of INR 437.

How the Insight is Structured

The Insight begins with a background on Dabur's Catch 22 Situation followed by a Brief Overviewof Dabur. We highlight the story so far and where we think is the disconnect. We discuss key takeaways from our field findings (primary research) and lay out our assumptions on how we think management will respond. We present where and how we differ from consensus and what does it mean for the stock price. We conclude the Insight by highlighting where we could be wrong along with key financials and an appendix about our primary research.