Buy Dollar Industries; target of Rs 523: Anand Rathi

Anand Rathi is bullish on Dollar Industries has recommended buy rating on the stock with a target price of Rs 523 in its research report dated February 16, 2025.

Broker Research

February 17, 2025 / 12:23 IST

Buy

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Anand Rathi's research report on Dollar Industries

In line with ARe, Dollar Industries' Q3 sales grew 14.8% y/y. The South brought ~8% to 9M FY25 revenue; plans are to hike this to 13-15% over 2-3 years. At end-Q3, the company had 17 EBOs and plans to increase this to ~125 by FY26. Force NXT (premium segment) continues to do well, recording 13.8%/23.3% value/volume growth y/y. On stockpiling for Q4, inventory days were a high ~127 at Dec'24, expected to normalise to 95-97 by end-FY25. The cash-conversion cycle rose to 171 days (150 at end-FY24), projected to drop to ~145/135 in FY26/FY27, driven by the Lakshya expansion, which is deepening sales penetration and shortening the receivables cycle (by 25-30 days, medium term), improving cashflow, and working capital efficiency, which would help towards the company’s net debt-free goal by FY27. Management re-affirmed its FY25 guidance (12-13% revenue growth, 11% EBITDA margin) and targets Rs20bn revenue in FY26 with a 13-14% EBITDA margin. The stock has fallen 25% in the last two months. We are confident about the company’s prospects, supported by Lakshya’s deeper penetration, expansion in the South, premiumisation, and modern trade and e-commerce’s rising share in the revenue mix.

Outlook

We introduce FY27e and upgrade the stock to a Buy with a revised 12-month TP of Rs523, valuing it at 18x FY27e P/E (earlier Rs605, 23x FY26e P/E).

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