DOMS Industries: Target Price Raised to Rs 2883 by Prabhudas Lilladher
Prabhudas Lilladher Maintains BUY on DOMS Industries with a Target Price of Rs2,883
Prabhudas Lilladher's research report on DOMS Industries has been released, highlighting the company's performance in the first quarter of the fiscal year. DOMS Industries reported an in-line performance with revenues of Rs6,040mn, which is in line with the predicted Rs5,951mn. The EBITDA margin stood at 16.7%, a 40bps increase from the predicted 16.3%.
The stationary division was a key contributor to the company's growth, with a 19.0% year-over-year (YoY) increase in top line revenue. This growth was driven by new launches in categories such as pencils, pens, erasers, and bags. The EBITDA margin for the stationary division was 18.5%. The company's capacity expansion in the core stationery business, particularly at the Umbergaon plant, which is expected to commence production in the second quarter of FY27E, and the widening product basket (with a 400-unit increase in SKU count over the last 1 year) are expected to drive sales and profit after tax (PAT) compound annual growth rate (CAGR) of 20% and 23%, respectively, over FY26-FY28E.
However, the company's EBITDA margin is expected to dip 50bps YoY to 16.8% in FY27E due to increasing volatility in raw material prices. Nonetheless, a calibrated price revision and stabilization in raw material prices are expected to result in a recovery in EBITDA margin to 17.7% in FY28E. DOMS Industries currently trades at a price-to-earnings ratio of 53x and 39x its FY27E and FY28E earnings per share (EPS), respectively.
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Recommendation
Prabhudas Lilladher maintains a BUY rating on DOMS Industries with a target price of Rs2,883, based on a price multiple of 50x its FY28E EPS. There is no change in the target multiple.
EBITDA Margin Comparison
| Fiscal Year | Predicted EBITDA Margin | Actual EBITDA Margin |
|---|---|---|
| FY26E | 15.5% | 15.3% |
| FY27E | 16.3% | 16.7% |
| FY28E | 17.2% | 17.7% |
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Investor Takeaway
Investors should consider DOMS Industries for its growth prospects in the stationery division.
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