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HSBC on Dabur India

May 16, 2008

In a report released just minutes ago, HSBC has reiterated its OVERWEIGHT rating on Dabur India. Dabur is one of the least expensive consumer stocks in India and trades at an 18% discount to peers on PEG basis.

Foods has been integrated into the Consumer Care Division and will have access to a wider distribution network. Consumer Health Division has seen revival in H2FY08 and we see this continuing in FY09e on better brand support and new packaging. A large portion of the consumer care division portfolio has been relaunched and is likely to post good sales growth and the company plans price hikes.

FY09e sales will be higher at 16.7% compared to 15.2% in FY08. Volume growth to remain at FY08 levels but price increase is due to uncontrolled Inflation.Dabur currently trades at a PEG of 1.17 compared to the sector average of 1.43. The stock is currently trading at 22.1x FY09e. HSBC Analyst apples a multiple of 22x to March 2010 consolidated EPS estimate of INR 5.35. This gives a price target of INR118 per share.

DalalStreet.Biz: We will not recommend any fresh BUYING, but existing investors can stay invested.

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