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On Tuesday, Phillip Securities began coverage on Dabur India (NS:DABU) Ltd. (DABUR:IN) with a positive outlook, assigning a Buy rating and establishing a price target of INR630.00. The firm's analysis indicates confidence in the company's strong positioning within the Ayurvedic market in India and its potential for sustained demand in its product categories.
Dabur India Ltd., recognized for its expertise in Ayurveda, is expected to continue its dominance, especially in health supplements and therapeutic segments. The company is poised to capitalize on the anticipated rural economic recovery, which accounts for nearly half of its business. Phillip Securities highlighted Dabur's proactive approach to growth through the introduction of multiple new product developments, increasing its market reach.
Despite the benefits of an expanding product line, the company has faced challenges, such as the costs associated with managing a large number of stock keeping units (SKUs), which recently led to an inventory correction.
Nevertheless, Dabur's core portfolio, including digestives, home care, and oral care products, maintains strong performance. The company's juice and hair oil segments, which have struggled in the past, are now starting from a more favorable base.
The second half of the fiscal year is expected to show modest growth for Dabur, and according to Phillip Securities, the market has already accounted for much of the pessimism surrounding the company's prospects. The firm suggests that any further price dips following potential weak third-quarter results could present an attractive buying opportunity for investors.
Phillip Securities' valuation of Dabur's stock at a forward price-to-earnings (PE) ratio of 46x reflects a 10% premium over the company's five-year average, underpinning the Buy rating and the INR630.00 price target. This optimistic stance is based on the belief that the company's strategic initiatives and market position will translate into favorable performance going forward.
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