Buy DOMS Industries; target of Rs 3349 Prabhudas Lilladher

Prabhudas Lilladher's research report on DOMS Industries

We initiate coverage on DOMS with a BUY rating and TP of Rs3,349. In an industry dominated by unorganized players, competitive edge of DOMS stems from 1) superior brand recall 2) ability to offer innovative products (eraseners, two-dooz sharpeners & grove pencils) 3) cost competitiveness arising from backward integration 4) strong distribution reach with 125,000+ retail touch points and 5) superior R&D capabilities & technical know-how given the collaboration with FILA. DOMS has a diversified stationary & arts material portfolio and has outlined a capex plan of Rs4,535mn spread over 2 years to expand capacity in writing instruments, water color pens and markers & highlighters at Umbergaon. Given the expansion plans, we expect revenue/PAT CAGR of 26%/28% over FY24-FY27E. Recent entry into diapers market with plans to enter into ancillary categories like footwear, apparels, confectionaries, and sports gears & accessories widens the addressable target market for DOMS providing growth optionality.

Outlook

We value the stock at 60x FY27E EPS with a TP of Rs3,349. Initiate with a BUY.

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