Buy DreamFolks; target of Rs 430: Motilal Oswal

Motilal Oswal's research report on DreamFolks

DreamFolks (DFS) posted a revenue growth of 7.3% QoQ/11.5% YoY to INR3.4b, in line with our estimate of INR3.3b. Gross profit was flat YoY and down 2.5% QoQ to INR382m, with a gross margin of 11.2% (down 110bp QoQ). EBIT margin came in at 6.5%, down 220bp YoY/50bp QoQ. Consolidated PAT was INR169m (down 16% YoY/up 5% QoQ), below our estimate of INR189m, and PAT margin stood at 5.0%. The company’s revenue grew 14.5%, while EBITDA and PAT were flat in 9MFY25 vs. 9MFY24. We expect its revenue/EBITDA/PAT to grow 17.5%/3.2%/4.8% YoY in 4QFY25. We reiterate our BUY rating on DFS with a TP of INR430, implying a 19% potential upside.

Outlook

We see near-term pressure in minimum credit card spend criteria affecting growth. Thus, we cut our target multiple to 20x (earlier 21x). We value DFS at INR430 per share (19% upside), at 20x Dec’26E EPS. Reiterate BUY.