Consumer - India: Healthy quarterly trends, but a number of macro/micro watchouts near-term

Research evidence excerpt

Consumer - India: Healthy quarterly trends, but a number of macro/micro watchouts near-term

Upside risks: 1) faster recovery in the consumption environment and overall demand

trends in the oral category, 2) higher consumer traction to the company's market

development initiatives (go-to-market, new launches, promotional campaigns), and 3)

higher-than-expected dividend or a possible buyback, which may provide downside

support. Alternatively, an value-accretive M&A or new category addition could be viewed

positively.

Downside risks: 1) weaker-than-expected growth profile due to the company's inability

to raise the category consumption frequency, 2) further aggression by MNC/local/D2C

players, which could affect the company's competitive position or profitability, and 3)

higher inflationary pressures, which could weigh on the company's earnings.

Dabur India (DBUIF)

Our PO of Rs520 is based on 40x FY28E consolidated EPS. Our target multiple is at

c.10% discount to stock's average forward multiple over last 10 years reflecting the

current business trajectory, growth and profitability outlook . Like most India Consumer

peers, the high absolute valuations are warranted for a strong portfolio (with Dabur

having a number of niche products on the health and wellness plank), execution track

record and reasonably steady business trajectory.

Downside risks: a) moderation in economic recovery seen over the past few quarters,

especially in rural markets, could be perceived negatively, b) significant commodity cost

inflation is a negative for company's profitability, c) significant disruption in overseas

markets due to on-going geopolitical conflicts, and d) rise in competitive intensity or

market fragmentation with multiple organized / unorganized players or new-age