Target: ₹1,950

CMP: ₹1,752.20

DOMS is a leading school stationery and art materials company in India. The company has doubled its sales over FY16-19 and again over FY19-23. Despite negligible advertisement spends, its products are popular with children. The company’s strength has been innovation and end-to-end manufacturing, due to which it is able to offer greater value to consumers, while having attractive margins and ROE.

We see growth opportunities in its existing and new categories. We initiate coverage on DOMS with an Outperform rating.

Well-placed to benefit from increasing spends on children’s education.

We like DOMS for its: strong organic revenue growth of 21 per cent during FY18-23, well ahead of stationery and FMCG peers; strong brand awareness amongst children, which can be leveraged to drive sales of new products; minimal spend on advertisements and zero credit to stockists, which indicates strong demand for its products; local promoters with a strong understanding of the Indian stationery market and a foreign promoter (F.I.L.A.) that has 100+ years multi-country experience in the industry; strong balance sheet with cash, which the company is looking to deploy in greenfield expansion; new areas of growth including the Pen category as well as small acquisitions in the toys and school bags space; and management’s strong focus on margins and return ratios; and positive feedback from distributor and retailer visits as well as DOMS’ factory visit.