dabur india limited stock price

Dabur India Ltd. – BUY

Recommended PriceRs 500
Target (Rs)Rs. 592
Investment period 1 Year

Dabur India Limited (DIL), with a heritage of 139 years, and a leader in ayurvedic and natural healthcare globally. The company boasts a strong product lineup with eight major brands, including Dabur Chyawanprash, Dabur Honey, and Dabur Amla, spanning healthcare, personal care, and foods & beverages. Dabur products are distributed widely, reaching 7.7 million retail outlets across diverse urban and rural markets. Internationally, DIL’s presence extends to over 100 countries.

The company’s vast product range includes over 400 items across 21 categories. DIL operates 22 manufacturing facilities in locations such as India, UAE, Sri Lanka, and several other countries. To enhance its market reach, the Company has organised its sales force by zones. Transitioning from a family-run business to a professionally managed corporation, it continues to grow and adapt in the competitive FMCG sector.

Why should we invest in Dabur India Ltd.?

Strong market position in the domestic FMCG space aided by strong brand, acquisition and market share gains

Strong brands like Dabur Chyawanprash, Dabur Honey, and Real juice, which are especially popular in the ayurvedic and herbal product market. This reputation served DIL well during the pandemic when demand for health-boosting herbal products soared. The company has managed to hold its own in a market filled with both large international and local competitors.

To continue growing, Dabur actively pursues opportunities to buy other companies that can complement its existing product lineup. A recent example is acquiring a 51% stake in Badshah Masala, allowing DIL to venture into the branded spices and seasonings market, an area closely related to its core business. This move is part of DIL’s broader strategy to enter new food categories.

The company’s focus on innovation and consumer needs has helped it expand and improve its market presence significantly, even with fierce competition.

New manufacturing facility approval in South India to meet the growing demand for products

DIL has noticed a big increase in demand for its products in South India, which makes up about 18-20% of its business within India. To respond to this rising demand, the company has decided to invest Rs. 135 crores to build a new plant in South India. This plant will focus on increasing the production of toothpaste, Odonil, and honey.

This investment marks the establishment of DIL’s 14th manufacturing site in India. The new facility aims to boost DIL’s production capabilities in the region and support continuous growth by efficiently meeting the local demand for its products. This move is seen as a strategic step to strengthen DIL’s presence in South India and ensure long-term growth by being closer to the market and consumers there.

Valuation and Outlook

DIL is a leading player in India’s FMCG sector, known for its herbal and ayurvedic products. The company has a strong presence across various categories, with Health Care making up 38.8% of sales, Home & Personal Care 46%, and Food & Beverages 15% as of the third quarter of FY24. Despite challenges like high inflation and intense competition, the Company has managed to perform well financially, maintaining a steady operating margin around 20-21%.

Its success is driven by strategic acquisitions, a focus on main brands, launching new products, and gaining more market share. DIL is expanding rapidly, especially in e-commerce and rural areas, while transforming its leading brands into versatile platforms. Given its strong market position and focus on innovation, we recommend buying Dabur’s stock.

We predict a potential price increase of 18% over the next 12 months, estimating a target price of Rs. 592 based on future earnings projections

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