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Maintain Buy; impressive longterm opportunity, near-term challenges notwithstanding
Action: Reaffirm Buy on long-term opportunity
We maintain our Buy rating on Dabur and believe it is a good defensive
play in the current challenging economic scenario. Moreover, we believe,
Dabur’s unique Ayurvedic positioning should be quite beneficial for its
domestic business, thus helping keep competition from MNC players at
bay. We maintain our Buy rating and TP of INR116, implying potential
upside of 18% from current levels.
Catalyst: Margins to rebound in FY13F
Of late, the Street has been largely concerned about the slowdown in
volumes. However, we believe, the worst is behind us and expect to see
an improvement, going forward. While volumes are likely to remain steady
at high single-digits, we expect margins to rebound smartly in FY13F. We
estimate steady 20% earnings growth for the next couple of years.
Valuations: Now below the longer-term average
The stock currently trades at a P/E multiple of 21.2x FY13F EPS of
INR4.7. This is at a discount to the long-term average multiple of 22x and
at a significant discount to the peak multiple of 28x. On a relative basis, it
trades at a 10% discount to its peers with a similar earnings trajectory,
which we believe is not fair.
In our view, while things remain a bit uncertain in the near term, it’s all in
the price now. Post the underperformance of 2011, we expect Dabur to
bounce back in 2012F. Reaffirm Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maintain Buy; impressive longterm opportunity, near-term challenges notwithstanding
Action: Reaffirm Buy on long-term opportunity
We maintain our Buy rating on Dabur and believe it is a good defensive
play in the current challenging economic scenario. Moreover, we believe,
Dabur’s unique Ayurvedic positioning should be quite beneficial for its
domestic business, thus helping keep competition from MNC players at
bay. We maintain our Buy rating and TP of INR116, implying potential
upside of 18% from current levels.
Catalyst: Margins to rebound in FY13F
Of late, the Street has been largely concerned about the slowdown in
volumes. However, we believe, the worst is behind us and expect to see
an improvement, going forward. While volumes are likely to remain steady
at high single-digits, we expect margins to rebound smartly in FY13F. We
estimate steady 20% earnings growth for the next couple of years.
Valuations: Now below the longer-term average
The stock currently trades at a P/E multiple of 21.2x FY13F EPS of
INR4.7. This is at a discount to the long-term average multiple of 22x and
at a significant discount to the peak multiple of 28x. On a relative basis, it
trades at a 10% discount to its peers with a similar earnings trajectory,
which we believe is not fair.
In our view, while things remain a bit uncertain in the near term, it’s all in
the price now. Post the underperformance of 2011, we expect Dabur to
bounce back in 2012F. Reaffirm Buy.
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