Shares of DOMS Industries Ltd continued to hog limelight on Wednesday after the firm declared Q1 results. Brokerage firms remained positive on the recent multibagger stock market debutant, given its strong earnings, robust expansion plans and solid profitability of the stationary product retailer.
DOMS Industries reported a 49.5 per cent year-on-year (YoY) jump in net profit to Rs 54.3 crore in the June 2024 quarter compared to Rs 36.3 crore in the same period last year. The stationery company's consolidated revenue from operations rose 17.3 per cent YoY to Rs 445 crore in the given quarter.
The strong topline drove a 38.9 per cent YoY gain in Ebitda to Rs 86.4 crore for the quarter ending June, with margins expanding sharply by 300 basis points to 19.4 per cent. The scholastic stationery remained the company's largest product category, contributing 43 per cent to revenue in Q1, followed by scholastic art materials at 25 per cent, and kits and combos at 8 per cent.
DOMS Industries continues its run of strong results in Q1FY25. Given better product mix and higher operating efficiency, margins further improved 300 bps YoY to 19.4 per cent. However, management conservatively guided for over 20 per cent growth in FY25 with margins at 17 per cent given new businesses come with initial lower profitability, said Nuvama Institutional Equities.
"We reckon diversification into baby products via recent acquisition and changes to its MOA open up vast opportunities in the kids' category. Hence, given better-than-expected results and foray into new segments, we are raising target valuation to 56 times," Nuvama added with a 'buy' rating and a revised target price of Rs 2,580 on the stock.
DOMS delivered robust results despite challenges such as extreme weather in North India impacting school operations. The company has also expanded its distribution to a pan-India level and plans to introduce new SKUs in the pen category. Its long-term goal is to broaden its market beyond stationery and art supplies to include products for a wider kids segment, said Axis Securities.
"DOMS maintained FY25 revenue growth guidance but has slightly reduced its Ebitda margin guidance. This accounts for higher raw material costs (polymers, waxes), the integration of the lower-margin Unilcan acquisition, and increased ESOPs. We cut down our estimates marginally to account for a lower margin trajectory in the near term," it said with a buy tag and a target price of Rs 2,620.
Shares of DOMS Industries were listed at the bourses on December 20, 2024, when the company raised a total of Rs 1,200 crore through its initial stake sale, selling its shares for Rs 790 per share. The issue had received a solid response from the investors getting subscription on nearly 100 times. The stock was listed at a stellar premium of 77 per cent at Rs 1,400 on the bourses.
Shares of DOMS Industries scaled its record highs at Rs 2,545.60 on Tuesday, while the stock traded at Rs 2,300 on Wednesday, with a total market capitalization slightly below Rs 14,000 crore. The stock has rallied over 220 per cent from its IPO price and is up more than 80 per cent from its listing price.
DOMS delivered yet another strong quarter on operating performance. Domestic performance remained the key growth driver while exports declined during the quarter due to subdued demand. Gross margin was slightly below estimate; however, better absorption of overheads led to earnings beat, said JM Financial.
"Going ahead, share gains in core categories backed by innovative products and faster scaleup in Pens/Art Material aided by capacity additions will drive overall revenue growth. DOMS plans to expand in product lines where its existing capabilities can be leveraged and which are associated with growing years of kids/young adults," it said with a 'buy' rating and a target price of Rs 2,415.
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