Shares of FMCG major Dabur rose today, April 16 as UBS has upgraded the rating and revised target price, while highlighting bottomed valuations and the need to sustain growth.
In its recent note, the brokerage has upgraded Dabur shares to 'Neutral' rating from 'Sell,' while setting a target price of Rs 490, marking a 13% upside from the previous closing price of Rs 433.35.
Dabur shares advanced 1.88% intraday to Rs 441.4 apiece. The scrip was trading 0.13% higher by 11:08 a.m. The benchmark NSE Nifty 50 was up 0.34%.
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Out of the laggards in India consumer sector, Dabur stands out with the stock down around 20% in the past five years, along with a low single-digit earnings CAGR in the same period. The question arises on Dabur's valuation given the recent high single or double-digit sales growth in home and personal care, and bottoming out of decline in beverage, following a price led disruption. According to UBS, a revival to even high-single-digit growth is unlikely to trigger a material valuation re-rating, limiting upside and supporting the 'Neutral' rating.
What does Q4FY26 update reflect?
As per Q4FY26 update by Dabur, the domestic business grew by a high single digit rate. Sales in the home and personal care sector rose by double digits, led by hair oil, shampoo and other home-care products.
The note said that this segment can continue to fuel high-single-digit growth in FY27 as well. In the healthcare segment, Honey, Honitus and Hajmola sales surged by double digits, while seasonal weakness in Glucose and Chyawanprash led to low-single-digit segment sales growth in the fourth quarter. However, the brokerage estimates that the growth can accelerate in FY27.
For food and beverages, revenue rose in low single digits, despite over 20% growth in foods, Real Activ juices and coconut water, however, the weakness is past its worst, the note said.
In terms of international business, the performance was mixed, weighed down bye the Middle East disruption, while Turkey, Bangladesh and the UK posted double-digit sales growth. The revenue is expected to grow in single digits in Q4, with a growth EBITDA. For FY27, UBS estimates that consolidated revenue and EBITDA will grow by 8.3%.
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