2021-07-28 07:31:18
Dollar Industries: Winds of change are blowing (Interesting Read. Domestic brokerage note)
#Dollar Industries, a dominant player in branded innerwear segment, has seen decent change in its earlier philosophy of higher working capital led growth to net cash flow focused growth. Over last few years company was not able to generate decent operating cash flow which has changed completely in last few quarters and company has generated almost Rs132crs net cash from operating activities during FY21 and Rs53crs during FY20 against negligible cash flow during FY15-20. This change of cash flow focused growth may lead to rerating of the company if sustained going ahead and the management has guided for debt free balance sheet by next financial year with better margins, growth and working capital management.
#The company has hired a professional agency Vector to implement the working capital optimization strategy and better penetration strategy at PAN india level. The company has already experienced better results of this strategy in few states like Karnataka, Rajasthan etc.
#The operating margin trajectory is getting stablised at 15% with focus on better operating efficiency and advertising spend optimization.
#The focus on different product categories across company’s own brands will go a long way to achieve better and sustainable growth and achieving ~15% CAGR growth over next few years does not seem to be a big challenge.
#Return ratios are expected to look up with better growth opportunities, operating and financial leverage, possibility of rerating of the stock is high going ahead. Management guided for around 1200 cr topline and 15% operating margins during FY22. Going by the recent surge in valuation of Rupa and Lux, valuation of Dollar turned very attractive in light of compounded growth story going ahead.
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