DOMS Industries shares surged 95% in 8 months, up 200% from its IPO price

Investors who were allotted shares of DOMS Industries in December are likely happy with their investment decision, as the company's stock has been on a bull run since listing, consistently reaching new all-time highs each month.

The shares are currently trading at ₹2,394 apiece, which indicates a 203% premium to the IPO price of ₹790. Notably, the company posted positive performance in all eight months following its listing, gaining 95%. On July 24, the shares surpassed the ₹2,500 mark for the first time, reaching a record high of ₹2,539 per share.

DOMS Industries has established itself as a prominent player in the Indian stationery and art products market, holding a 12% market share in FY23. This success is largely due to several factors: in-house manufacturing capabilities, effective product differentiation by identifying market needs, strategic partnerships with FILA for global product access and expanded reach, and a continued emphasis on broadening its distribution network.

Looking ahead, the Indian stationery and art materials market is projected to expand at a 13% CAGR from FY23 to FY28, increasing from ₹38,500 crore in FY23 to ₹71,600 crore by FY28, as per the recent estimates.

This trend bodes well for DOMS, which is actively enhancing its manufacturing capacity to meet rising demand. Additionally, the company is diversifying into new segments, having acquired a 30% stake in ClapJoy Innovations (toys) and a 51% stake in SKIDO Industries (school bags) over the past two years.

To strengthen its supply chain, DOMS also acquired a 75% stake in Micro Wood Pvt. Ltd., a packaging business. The company is currently expanding its pencil manufacturing capacity, which holds a 29% market share, with production expected to begin in Q4 FY25.

The company is a leading name in India's stationery and art market, with a portfolio of over 4,000 SKUs covering scholastic stationery, art materials, office supplies, and more. As of March 2024, the company has a total reach of 122,500 retail outlets, supported by 120 super-stockists and 4,300 distributors across 29 states and union territories.

Room for more gains?

In early July, Axis Securities initiated coverage of DOMS Industries, assigning a 'buy' rating with a target price of ₹2,670 per share. The brokerage's positive outlook is underpinned by the company's robust and consistent performance over recent quarters, which is expected to persist.

This confidence is supported by several factors: continued expansion into under-penetrated small towns and eastern and southern markets, a sustained focus on new product development (NPD), and capacity expansion, including entry into the larger pens category, thereby diversifying the product portfolio beyond the small pencil segment.

Additionally, DOMS Industries' foray into the growing bags and toys segments is anticipated to further bolster growth. Axis Securities projects the company will achieve a healthy revenue, EBITDA, and PAT growth rate of 25%, 26%, and 28% CAGR, respectively, over FY24–27E, with the return on capital employed (ROCE) expected to rise from 22% in FY24 to 25% in FY27.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.