On Thursday, JPMorgan (NYSE:JPM) adjusted its outlook on Dabur India Ltd. (DABUR:IN) stock, reducing the price target to INR580.00 from the previous INR625.00, while the stock's rating remains at Neutral. The revision follows a notably weak second quarter for the company, where domestic Fast-Moving Consumer Goods (FMCG) revenue decreased by 7.6% year-on-year. This decline was attributed to inventory rationalization in the urban general trade channel, although secondary sales saw a modest increase of 2.3% year-on-year.
Dabur India experienced a significant drop in EBITDA and profit after tax (PAT) due to the challenges faced in Q2. However, the company is optimistic that the impact of the channel correction is largely resolved and anticipates a return to mid-high single-digit revenue growth in the second half of the fiscal year 2025. This expectation is supported by a projected favorable winter due to La Nina effects and anticipated improvements in rural markets.
The company's Home and Personal Care (HPC) and Healthcare segments performed relatively better, with secondary sales growth of 6% and 4% year-on-year respectively. Meanwhile, the Food & Beverage (F&B) sector continued to struggle, with secondary sales declining by 11% year-on-year, particularly in the nectar category.
In addition to its financial performance, Dabur announced the acquisition of Sesa Care, a leading Ayurvedic hair care brand. The transaction is valued at an enterprise value (EV) of between INR3.15 billion and INR3.25 billion, representing FY24 EV/Sales and EV/EBITDA multiples of 2.4x and 19x, respectively. This strategic move is aimed at bolstering Dabur's portfolio in the hair care segment, where Sesa Care holds the position of the third-largest brand.
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