Mumbai: Brokerages cut the target price on Dabur India by up to 10 per cent, reflecting the weakness in demand for discretionary goods for the packaged consumer goods maker on the back of Covid-19 induced nationwide lockdown.
Dabur shares were trading nearly 2 per cent higher on BSE. The stock is up 6 per cent over last one year, while Sensex had eroded 20 per cent value.
Brokerages downbeat: HDFC Securities maintained its “reduce” rating on the stock and slashed the target price to Rs 447 from Rs 404, as it cut the EPS estimate by around 10 per cent for FY21 and FY22. Kotak Institutional Equities also maintained its “reduce” rating on the stock while cutting the target price to Rs 400 from Rs 440 earlier. It also slashed FY2021-23 revenue estimates by 2-3 per cent due to the primary and derivative impact of Covid-19.
Coronavirus impact: Dabur was among the first few FMCG companies to suspend operations at its manufacturing units before the nationwide lockdown. On March 23, Dabur halted operations at roughly 60-70 per cent of its manufacturing plants in India. It has 12 manufacturing units in the country.
The nationwide lockdown resulted in a significant reduction in the business operations of the company in terms of sales and production.
“The management has considered the possible effects that may result from the pandemic on the recoverability/carrying value of the assets. Based on the current indicators of future economic conditions, the management expects to recover the carrying amount of the assets, however, the management will continue to closely monitor any material changes to future economic conditions,” it said in a statement.
Disappointing Q4 report card: Dabur India on Wednesday reported a 14.24 per cent year-on-year (YoY) drop in consolidated net profit at Rs 319.24 crore for the March quarter against Rs 372.26 crore in the same quarter last year. The profit figure missed ET NOW poll estimate of Rs 391 crore.
What next from here? Kotak Institutional Equities pointed out that Dabur continues to operate with a renewed vigour on new product development (NPD) and market share aspiration, but the stock price fully captures the vigour.
HDFC Securities also pointed out that Dabur can capitalise on the rising consumer trend towards naturals/ayurvedic, health supplement and hygiene products in the medium term. However, aggregate demand will be weaker for discretionary business in India and international business will also be volatile with several macro headwinds in FY21, it added.