Buy Dabur India - War Horse - Sumpoorna

Dabur India Ltd. ("Dabur India" or "The Company") is the fourth largest FMCG company in India with revenues of over US$1 Billion (Rs.5,283 Crore) and Market Capitalization of US$4 Billion (Rs.21,000 Crore). The company is a world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur India FMCG portfolio today includes five flagship brands with distinct brand identities. The company today operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The company has 12 Billion Rupee Brands turnover of over Rs.1 billion each. Dabur India has a wide distribution network, covering over 3.4 million retail outlets with a high penetration in both urban and rural markets. The company's products also have a huge presence in the overseas markets and are today available in over 60 countries across the globe. Its brands are highly popular in the Middle East, Africa, SAARC countries and the US. Dabur India overseas revenues account for over 30 percent of the total turnover.

Investment Rationale:

Dabur India which earns nearly half of its domestic revenues from rural India has embarked on an aggressive rural push through its 'Project Double' launched in FY12. Under this initiative, the company wants to double its direct rural reach to 27,000 villages by FY13. Through this initiative, the company increasing the visibility of its product offerings particularly in under-penetrated categories such as toothpaste, shampoo and hair oil.

Dabur India has realigned its business structure by merging Consumer care and Consumer health divisions into a unified 'Consumer Care' business unit. This will particularly benefit the integrated health care vertical as the OTC and ethical Ayurvedic portfolio were operating at sub-optimal scale. Dabur India food business having 11 percent share in consolidated revenues mainly comprises of packaged fruit juices under the Real and Active brands. With growing income levels, changing lifestyles and greater focus on health, the demand for fruit juices should continue to grow.

Dabur India international business operations have grown at a scorching 50 percent in the past three years backed by 'Hobi' and 'Namaste' acquisitions in FY11. With most of Namaste integration complete, we expect overseas business to grow.

Dabur India topline grew by 29.6 percent in FY12 and net profit increased by 13.4 percent. The steady growth achieved by Dabur has been enabled by sustained investments in marketing and brand building, distribution, production, supply chain management, and by driving operational efficiencies across functions.

Dabur with its unique Ayurveda positioning, diverse product portfolio, strong brands kitty and sound overseas business is better than most of its FMCG peers. Hence, we strongly recommend a "Buy" for the company's stock.

Source : Equity Bulls

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