As India looks forward to the presentation of the Union Budget on 1 February 2018, expectations have already started building up. Since it may be the government’s last full-fledged budget before the general elections next year, a few populist proposals are likely to find a place. Rising oil prices and managing fiscal deficit are the key factors that would weigh in the mind of the Finance Minister. Tax collection and divestment targets are expected to set higher benchmarks to justify the higher spending on infrastructure and rural projects. Many economists believe that there is less likelihood of any changes in capital market taxes, which should restore investor confidence. Uncertainty around GST collection in the first year of implementation, with the framework still evolving, makes it very difficult to accurately assess the country’s fiscal health in the current financial year. However, there is going to be volatility ahead of the budget and Q3 FY18 earnings, prompting stock specific actions. Branded goods and retailing fast moving consumer goods are expected to gain market share from unorganised players and companies like Dabur India are expected to perform very well in the near future. Dabur India Ltd has two divisions, namely the consumer care division and the foods division in the country, apart from its international operations. The consumer care division offers a wide range of products in hair care, oral care, health supplements, digestives and candies, baby and skin care products based on ayurveda, over-the-counter products, and branded ­ethical and classic products. The second division, Dabur Foods Ltd produces fruit juices, cooking pastes, sauces, and items for institutional food purchases. The company is well placed among its consumer goods peers because of its positioning, whose products are derived from exotic natural ingredients such as herbs. The company has various brand leaders in different market segments—Dabur Chyawanprash, a health tonic, and Dabur Hajmola, a digestive tablet. Real, the natural juice launched a decade ago, has also successfully become a market leader. Its broad and strong product portfolio provides a good play in less penetrated and high growth categories. Dabur’s positioning on the “health and wellness” platform is very progressive, making it well-placed to capture the lifestyle changes-led growth in the consumer goods space. Smart acquisitions have helped strengthen portfolio. The company has also demonstrated its ability over the years to make and integrate smart acquisitions that complement its products portfolio and thereby drive inorganic growth. Improvement in margins of foods and international businesses are expected to result in improvements in margins for the consolidated operations. Analysts expect recovery in volumes led by new launches, uptick in rural spending, distribution tie-up with Amazon and government’s likely stimulus measures ahead of the elections. The Dabur stock, currently quoting on the Indian bourses at Rs 360, is a very good portfolio buy for a 40% price appreciation in 15 months.

 

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