Dabur surges to record high as investors are optimistic about the ‘recovery play’

• Dabur's share price has surged nearly 17.12% since March 31, taking its total market capitalization to a record high of ₹93,200 crore.
• According to Edelweiss, Dabur’s e-commerce business has more than doubled YoY, with its contribution going up from 1.5% to 5.6% during the lockdown period.
• Marico, in its September 2020 quarter performance and demand trends yesterday, said the company had witnessed a partial revival in the consumer sentiments in the second quarter after being impacted by the COVID-19 pandemic.

Like all other sectors, FMCG also bore the brunt of the COVID-19 led slowdown in the first quarter of this fiscal year. But with the gradual unlocking of the economy, the business has picked up momentum — led by favourable monsoon and the onset of the festival season.

FMCG companies around the country are operating at 100% production capacity. And Marico’s September quarter performance and demand trends affirm the recovery of consumer sentiment. The company said its “foods portfolio, riding the tailwind and on the back of innovations, continued its momentum and registered exponential growth in line with the company’s near-term expectations.”

What’s working for Dabur?

Just not Marico, the 136-year old Dabur— which was mostly dependent on its Glucose and Chyawanprash for revenue in the past six months as Ayurvedic products gained limelight, experienced a similar uptrend in its sales.

According to a Ventura report dated September 21, for Dabur, “the essential categories like oral care, health care, and other essentials witnessed a V shape recovery. On the other hand, discretionary categories like grooming, health care, skincare, and international business have been slow to recover.”

For Dabur, the brokerages are optimistic about recovery, as 38% of its total sales come from its health care portfolio. With the increasing consumer preference for health supplements, Ventura believes that Dabur is poised to grow further.

According to the Edelweiss report dated September 25, Dabur will continue to benefit from the ayurvedic platform's limelight. Dabur's products, such as chyawanprash, Ayush Kwath, Samshamani vati, mulethi powder, are projected to see record sales with the arrival of the winter season.

Dabur also utilised the pandemic as an opportunity and launched products that were the need of the hour, such as its aerosol-based sanitiser with fragrance. It has improved its online presence with the e-commerce contribution from 1.5% of the pre-COVID level to 5.6%.

FMCG companies’ shares mirror the recovery optimism

The broader Nifty FMCG index has climbed nearly 10% since the March-lows. Dabur has hit a record high in trade today (October 7). In fact, since March, Dabur has gained 17.12%, taking its total market capitalisation to a new high of ₹93,200 crore. And, the ICICI Securities has a ‘Buy’ call for Dabur with a target price of ₹554— that is an upside of 6% considering October 5 closing price.


SEE ALSO: Dabur emerges from COVID-19 hit quarter with a bigger market for Chyawanprash and Dabur Honey

TCS expected to post higher revenue and margins led by a streak of deal wins over the last three months