Natural Bounty

Dabur has been on a tear with the stock up 23% in 2018 compared with the 13% rise in the Nifty FMCG Index. In the same period, the benchmark Nifty is up 2% having given up most of its gain in the September- October carnage. CEO Sunil Duggal has made the most of this run-up and sold 443,077 shares at an average price of Rs.442 in December to net Rs.196 million.

Overall in 2018, Duggal has sold 786,228 shares worth Rs.350 million in the August-December period. Duggal still holds 5.04 million shares valued at Rs.2.2 billion. Among other insiders, director PD Narang also sold 671.589 shares worth Rs.297 million in September. Narang’s existing holding stands at 3.9 million shares worth Rs.1.67 billion.

For the quarter-ended September 2018, promoter holding stood at 67.88% from 68.05% a year ago. Over the same period, mutual fund holding has increased from 3.17% to 4.03% with Aditya Birla Sunlife holding 1.11% even as ICICI Prudential MF reduced its stake.

FPI holding has also increased from 17.34% to 18.15% with Arisaig India Fund showing up with more than 1% holding in June. Holding for the period ended December 2018 could show a fall in institutional holding as the stock sold down from Rs.440 to Rs.365 in October. The stock did pull back to Rs.455 in December before again being sold down to Rs.423.

While the growth rebound in Q3FY18 till Q1FY19 aided stock performance, FMCG stocks continue to trade at a premium and Dabur is no exception. According to Jefferies Research, at its current price, it trades at FY19 multiple of 48 & FY20 multiple of 40, respectively. Jefferies India analyst Varun Lohchab’s price target of Rs.460 and optimism is based on ‘steady demand scenario, company's improving execution, increasing to steady market share and waning intensity from Patanjali.’

Health supplements and OTC segment is pulling in consistent growth and easing raw material pressure is expected to shore up margins. Other brokerages bullish on the stock include Edelweiss Securities with a price target of Rs.560, Axis Capital with a price target of Rs.550 and HDFC Securities with a price target of Rs.498.