Dabur stock under pressure after business update but Motial Oswal sees 22% upside

Dabur said the unprecedented inflation led to weak demand trends across categories, adding urban markets driven by modern trade and e-commerce clocked double-digit growth.

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Dabur India share price traded in the red in the morning session on October 7, a day after the company came out with its business update for the quarter ended September.

The FMCG company in its business update for Q2 FY23 said that the geopolitical environment continued to have an unusually high inflationary impact on its business. Operating margin is seen 150 to 200 basis points lower than in Q2FY22 due to inflationary input costs but will increase sequentially.

However, the company stated that its business in the country has been steady and the firm expects to report revenue growth in mid-single digit despite challenges posed by the macro-economic situation.

The firm also said the unprecedented inflation led to weak demand trends across categories, adding urban markets driven by modern trade and e-commerce clocked double-digit growth.

At 09:51 am, Dabur India was quoting at Rs 541.05, down Rs 4.40 or 0.81 percent on BSE. It has touched an intraday high of Rs 544.20 and an intraday low of Rs 536.55.

Domestic research and broking firm Motilal Oswal has maintained its buy call on the stock with a target of Rs 660, an upside of 22 percent from the current market price.

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According to Motilal Oswal, the medium-term and structural narratives on revenue growth of Dabur are highly attractive, led by the initiatives taken by the new CEO in recent years on power brands, distribution, launches, and better analytics. Consequently, FY23 is likely to be the fourth year, out of five, of double-digit sales growth, it said.

“As the impact of investing in these initiatives abates, Dabur’s margin is likely to expand in FY24. Its sales visibility in the near term is better than its peers. Coupled with higher pricing power against its peers, the visibility on the firm’s earnings is better,” the brokerage firm added.

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