Buy DOMS Industries target of Rs 3337 Prabhudas Lilladher

Prabhudas Lilladher's research report on DOMS Industries

We increase our FY25E EPS estimates by 6% as we tweak our EBITDA margin assumptions in light of better performance in 2QFY25 but broadly maintain our FY26E/FY27E estimates, as Uniclan’s consolidation is likely to be margin dilutive. DOMS reported strong operational performance in 2QFY25 with EBITDA margin of 18.8% (PLe 17.7%) due to increase in ASP’s and accrual of operating leverage benefits arising from rising scale. During the quarter, DOMS 1) expanded capacity of mathematical instrument boxes and paper stationary by ~20%, 2) introduced 100 new SKUs, 3) increased the distribution reach by 10,000 touch points, and 4) successfully completed the acquisition of Uniclan. Expansion at the 44 acres land parcel is on track and the first building is expected to be ready by 3QFY26E. Led by the ongoing the expansion of product basket and distribution network, we expect sales and PAT CAGR of 28% over FY25E-FY27E.

Outlook

DOMS trades at 63x/50x our FY26E/FY27E EPS estimates and we believe earnings surprise will be key lever for re-rating given valuations leave little headroom for meaningful upside. Retain BUY with TP of Rs3,337 (60x FY27E EPS; no change in target multiple).