DOMS Industries Share Price Rises 10% to all Time Highs

DOMS Industries stock surged by more than 10% on May 28, reaching a record high of ₹2,035 per share. This surge followed the stationary company's announcement of strong Q4FY24 (January-March) results. The stock has now climbed over 150% since its initial public offering (IPO) price of ₹790 per share.

DOMS Industries recently released its financial performance for the fourth quarter of fiscal year 2024. Revenue increased by 20% year-over-year to ₹403.7 crore. Earnings before interest, tax, depreciation, and amortization (EBITDA) grew by 22.6% year-over-year to ₹76 crore, with margins improving to 18.8%. This is higher than the previous quarter's margin of 18.4% and the year-ago quarter's margin of 18.7%. Reported net profit climbed by 29.6% year-over-year to ₹46.9 crore.

Analysts at ICICI Securities said that, "We believe input price deflation and better revenue mix may have led to gross margin expansion." The EBITDA margins that improved 40 bps sequentially, at 18.8% were the highest since December 2022 quarter.

Excluding paper stationery, all operating segments experienced substantial annual revenue growth, notably art materials and office supplies. ICICI analysts anticipate positive outcomes due to the company's robust performance across segments, indicating market share gains in most areas. 

Following DOMS Industries' Q4 results, analysts at JM Financial issued a 'Buy' rating for the company, setting a target price of ₹2,000 per share. "We estimate 23.6%/25.5% sales/PAT CAGR over FY24-26E. Given the superior growth trajectory & healthy return on invested capital, we expect the stock to trade at a premium multiple. We remain optimistic on the company’s ability to gain market share by focusing on innovations and leveraging end-to-end manufacturing capabilities," the brokerage firm said.

To meet the growing demand, the company highlighted that a capital expenditure (Capex) of ₹126 crore is being invested in expanding its manufacturing facility, which is currently underway. DOMS is consistently increasing its manufacturing capacity, with a focus on expanding its writing instrument segment. It plans to commission an additional 100,000 square feet of capacity by June 2024. In addition, the company is expanding its capacities for its core pencil segment, which is expected to be commissioned before the end of fiscal year 2025 (FY25). 

DOMS Industries also has made acquisition of 51% stake in SKIDO Industries to fortify its presence in the back-to-school market, planning to expand in school bags, pouches and other such related items.

ICICI Securities analysts are optimistic about DOMS' future prospects. They attribute this positivity to the company's strong competitive advantages, including robust distribution and manufacturing capabilities, high brand recognition, and a strategic alliance with FILA. The analysts anticipate that DOMS' expansion plans, including capacity additions and entry into related business sectors, will drive significant growth in fiscal years 2025 and 2026.

"We remain positive on DOMS due to established competitive advantages of strong distribution and manufacturing capabilities, high brand recall value and strategic partnership with FILA. We expect capacity addition and entry into allied business streams to result in strong growth in FY25-FY26E," the brokerage firm added.

DOMS Industries, established in 1976, is a prominent stationery and art products player in India, holding a 12% market share in FY23. The company distinguishes itself with unique products such as pencil extenders, hexagon-shaped erasers, and triangular-shaped pencils. These innovative products have contributed to DOMS's consistent market share growth.