Dabur: Strong growth ahead, buy for an upside of 24%

Investment Rationale:
- Positive FMCG Industry outlook: Growing economy favors FMCG industry. Rural`s FMCG consumption is increasing. Dabur India Ltd (Dabur) enjoys a very strong brand equity.
- Organic and inorganic growth: Dabur is looking at organic and inorganic growth in healthcare and personal care categories. It has acquired energiser brand 30 Plus and is also in other acquisitions talks.

- Growth from Overseas Acquisition: In the FY 2010-11 Dabur made two international acquisitions. viz Hobi Kozmetik Group and Namaste Laboratories LLC . Dabur believes that these acquisitions will take its overseas business into an altogether different growth trajectory.
- Growth from Expansions and International operations: Dabur has lined up investments up to Rs. 200 crores for expansions including setting up three new factories overseas. ~ 22% of the company's sales come from international operations and in the current year it is expecting this to increase to 28% and in three years, the international operations will contribute around 35% of the overall sales.
Valuation: Improving standard of living, huge scope from rural markets, strong brand equity, company's initiatives for developing its OTC portfolio, New Innovative Product launches, significant expected contribution from company`s overseas acquisitions, company looking upon international markets as a key area and company`s expansion plans are some of the factors which are leading towards strong growth as well as earnings and profits of the company in the coming periods.
At CMP of Rs112.30, the stock is trading at a consolidated P/E of 37.06. Based on growth prospects, AC Choksi believes that for Financial year 2012, Dabur`s forward consolidated Earnings per share (EPS) to be Rs3.87 and recommends investors to buy the stock for a price target of Rs139, implying an upside of 24%

Source : ValueNotes.com