On Wednesday, Goldman Sachs (NYSE:GS) revised its outlook on Dabur India Ltd (DABUR:IN), downgrading the stock from Buy to Neutral, despite increasing the price target to INR 630 from INR 610.
The change in rating comes after a significant 28% rise in the company's stock price over the past three months, which the analyst attributes to expectations of increased government spending in rural areas, particularly through direct cash transfers.
Dabur India, known for its consumer goods, has a substantial portion of its revenue, approximately 45-50%, coming from rural consumption in India. However, Goldman Sachs points out that the anticipated boost in rural demand may not materialize as expected. The firm notes that rural spending growth remains subdued and that the allocation for two key direct cash transfer programs, PM Kisan and MNREGA, has not increased.
The investment firm has maintained its Earnings Per Share (EPS) estimates for Dabur India for the fiscal years 2025 and 2026 and introduced its estimates for FY27. The decision to roll forward the target price is based on projected earnings from the fifth to the eighth quarter. Despite the upward adjustment in the price target, the valuation is still pegged at a target Price-to-Earnings (P/E) ratio of 45 times.
The updated price target reflects a modest adjustment in valuation, but the downgrade to Neutral indicates a tempered outlook for the stock's potential growth, especially in the context of rural market dynamics. This assessment by Goldman Sachs suggests a more cautious stance on Dabur India's near-term performance in the stock market.
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