HSBC remains neutral on dabur on muted price growth

HSBC has maintained a ‘Neutral’ rating on Dabur India with a price target of Rs 115. Consumer care division registered a revenue growth of 15%, while foods grew by an impressive 30.5% in the quarter. While margins declined as the input prices persisted, and Dabur increased its A&P spend, overall net earnings grew by 16%.

Overall volume growth is expected to remain in high single digits but price growth will be rather modest , as competitive dynamics limits the scope of price hikes. “Our valuation work in the Indian FMCG space suggests that a sustainable volume growth is one of the most sensitive factors for the multiple contraction or expansion,” said an HSBC note. If Dabur were to sustain overall volume growth close to 10%, even a permanent rerating of the stock is plausible.