Dabur's growth potential justifies premium valuation of its stock

Focus on power brands and rural expansion augur well for the stock, trading at 43 times its FY21 estimated earnings

Shares of Dabur, which owns popular consumer brands such as Dabur Chyawanprash, Dabur Honey, and Hajmola, are currently trading at 43 times the company’s FY21 estimated earnings — a 15 per cent premium to its historical five-year average of one-year forward valuation. 

This might appear high against the backdrop of slowing consumption, but Dabur’s measures to sustain healthy growth rates through network expansion, product premiumisation, etc, seem to justify the valuation. 

According to Nitin Gupta, analyst at SBICAP Securities, “Dabur’s premium valuation is justified against the backdrop of its strategy to expand market share with focus on eight core brands