Dabur Shares Fundamental Analysis and Future Outlook
Dabur India Ltd is a market leader in Ayurveda and natural healthcare and amongst the top 4 FMCG companies in India. The company was established in 1884 and has a market presence of 13+ decades. Dabur operates some well-known brands like Dabur Honey, Dabur Chyawanprash, Real Fruit Juice, Honitus, Pudin Hara, Hajmola, Vatica, Red Paste etc which has a high top of the mind recall amongst its consumers.
- The business model for the company is such that the domestic contribution of revenue is 73% and International business from 100+ countries contributes the remaining 27%.
- Overall the healthcare business contributes 32%, Home and personal care contribute around 50% and Foods business contributes 18% to the total revenue. The Brands which have the largest revenue share includes Dabur Honey, Chyawanprash and Glucose-D which together contributes 17.6% and Dabur Amla, Vatika and Anmol which combined contributes 21.6% to the total revenue.
- The company has 16+ brands with a turnover of INR 1+ billion and 3+ brands with a turnover of INR 10+ billion. The brands Real Fruit Juice, Dabur Amla Hair Oil and Dabur Vatica are in INR 10+ billion categories.
- The International Business comprises both the Organic and Acquired business. Organic business (67% of international) is an extension of the Indian portfolio with the same personal care brands operating internationally. Acquired business (32% of international) comprises Turkey’s Hobi group and the US-based Namaste Group’s brands. Overall the business model is well diversified and the focus is on core growth.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis with the excel models on my blog (Check the source link)
Source: Dabur Fundamental Analysis and Future Outlook
Some insights for the coming years from the analysis, management discussions and con calls are as follows.
- The company will suffer from revenue loss in double digits due to the factory shutdowns, production loss and disrupted supply chains because of the Covid-19 outbreak. The situation, however, is only temporary and any significant growth since the 2019 base year will only be witnessed after FY 2021.
- There has been a sharp slowdown in India’s oral care industry since the last year. Dabur, however, has gained 0.3% market share in FY 2020 with 8.5% sales growth. Down-trading is expected in the oral care category in the coming years. (Down-trading is defined as reducing the number of features (and their associated benefits) or the quality of a product to suit the selling price demanded by its customers)
- Rural sales for Dabur grew 4% ahead of urban in 3rd Quarter of FY 2020. This was due to the increased village reach and direct distribution. Overall domestic sales growth was 5% YoY with 5.6% volume growth for the company.
- Apis India, which is a leading producer and exporter of honey is looking forward to expanding its business and compete with Dabur. Apis already does the bottling for big brands including Dabur and Patanjali as well as for the international chains such as Walmart and Metro Cash & Carry. Dabur Honey enjoys a market share of about 60% but this can lead to a reduction in market share for Dabur honey in the future.
Overall the company has solid fundamentals along with the large scale, solid branding and wide distribution. The product portfolio and business model are also well-diversified which will help Dabur to sail through these uncertain times. However, the company is facing increased competition in certain key segments which can slow down its upcoming growth.
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