Result Update: Dollar Industries Ltd (DIL) - BUY - TP Rs.390 - Kotak
DIL Q2FY19 results were ahead of our estimates due to strong volume growth of 20% with Missy and economy segment witnessed strong performance in the quarter while Force Nxt witnessed softness.
- DIL reported better than expected revenue growth of 24% yoy due to robust volume on a low base of last year. The company reported strong volume growth in Missy and economy segment. The company has adopted corrective measures for distribution of various brands and reducing debtors which resulted in 10 days reduction working capital cycle.
- EBITDA margin at 14.9% was ahead of estimates driven by improved gross margins driven by better product mix and higher realization.
- DIL management has maintained guidance for 15% revenue CAGR with15% EBITDA margins over longer period. The company showed confidence in meeting earlier revenue growth guidance of over 12% for FY19E with improvement in EBITDA margins of ~13.5-14%.
Valuation & outlook
The company is in process of strengthening its internal systems and improving distribution of high value brands. We maintain our EPS estimates for FY19E & FY20E. The stock is trading at PE of 23.6x and 19.6x on FY19E and FY20E EPS of Rs 13 and 15.6, respectively. We maintain our Buy rating on the stock with revised target price of Rs 390 (Vs Rs 437 earlier) valuing at 25x FY20E (vs 28x earlier) based on consolidation in business and increased macroeconomic challenges.
Shares of Dollar Industries Ltd was last trading in BSE at Rs.314.9 as compared to the previous close of Rs. 316. The total number of shares traded during the day was 59 in over 4 trades.
The stock hit an intraday high of Rs. 314.9 and intraday low of 314.7. The net turnover during the day was Rs. 18572.
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