#DOLLAR Industries Q4FY22 Earnings Call KTAs:
Dollar Industries (Dollar) is primarily engaged in manufacture and sale of hosiery products in knitted inner wears, casual wears and thermal wears. Dollar aims to achieve Rs20bn revenue by FY25. *The company has guided for ~15% topline growth led by volumes and EBITDA Margin guidance of ~17% during FY23.* The company has a strength of over 1100+ distributers and presence in 15+ countries. Dollar claims to be the highest selling Indian innerwear & knitwear brand in the UAE & Middle East. The exporting countries are mainly Middle Eastern & other Asian countries. During FY22, exports grew 112% to Rs.1.33bn. The company has 4 manufacturing facilities spread across India performing the tasks of spinning with a capacity of 400 tonnes/month, knitting with a capacity of 300 tonnes/month & dyeing & bleaching with a capacity of 400 tonnes/month. Dollar sells its retail products under the name of Big Boss, Champion, Missy, Dollar & more however it also has some standalone brands like Club, RKG & Force. The company inaugurated its first EBO in October 2021 under FOFO model (Franchisee Owned Franchisee Operated). Dollar entered into a 51:49 JV with G.O.A.T Brands Lab Pte for Pepe Jeans Innerfashion Pvt. Ltd. G.O.A.T Brands Lab Pte acquired 50% stake of Pepe and additional 2% non-voting equity. The new JV will be multi brand distributor dealing with all kinds of men, women and kids wear including undergarments, athleisure and sportswear made of natural fibres and MMF. The joint venture would undertake business in the territories of India, Sri Lanka, Bhutan, Nepal and Bangladesh.
Dollar revenues rose 21.4% in 4QFY22 to Rs3.7bn from Rs3.1bn YoY. The gross margin came in at 32.1% vs 34.9% (YoY) while gross profit increased to Rs1.2bn from Rs.1.1bnin Q4FY21. The EBITDA in 4QFY22 came in at Rs 592 mn compared to Rs332.5mn in Q4FY21 translating in a EBITDA margin of 15.7% versus 10.7% in 4QFY21 an expansion of 500bps. The PAT rose 85% to Rs371mn from Rs201mn YoY.
*Guidance & Outlook:*
*Contribution from value and volume:* During 4QFY22 the volume growth was down by ~1.5-2%, while value growth was ~23%. During FY22 out of 30.4% revenue growth the value growth contributed ~21% while volume growth was 9%. Dollar aims grow at 15-17% in FY23E driven by 9-10%volume growth.
*EBITDA Margin Guidance of ~ 17-17.5% for FY23:* During FY22 its EBITDA margin improved by 285 bps YoY and stood at 16.45%. The company has given a guidance of ~17-17.5% EBITDA margin in spite of sharp increase planned for Ad spend (Rs.1bn expected in FY23E).
*Raw material prices continue to be on higher side:* The management believes the raw materials market will remain volatile in the near future. The company undertook price hikes in 4-4.5% in Apr’22 and some hike in June’22. With the continued cost spiral (cotton candy prices increased to Rs115K compared to Rs75K in Jan’22 and hovering ~88K currently) company can take some more price hike if required.
*Capex plans:* The capex for FY22/FY23 is around Rs400mn/Rs850mn related to the new integrated warehouse (Rs.500mn) and spinning capacity (Rs650mn). The management aims to complete the project by FY23.
*Project Lakshya in focus:* The Company continues its focus on Lakshya with 142 distributors under project Lakshya by end of FY22 form ~51 at the beginning of the FY22 and aims to bring ~200 more distributor under Lakshya in FY23E and ~70% of overall distributors under this project by FY25.
*Targeting 25 EBOs in FY23:* Dollar plans to increase the number of EBOs in the current financial year by starting launches in U.P. & Rajasthan & then move into other states graudally. All stores in FOFO model. The number of EBOs is target to reach to ~125 by FY25.
Dollar has started the process of consolidating all its warehouses into a single warehouse to build operational efficiencies. Further the company aims for an integrated warehouse by FY23.
*Modern Retail share improving:* The modern retails sales are improving with 3% revenue contribution in FY22 moving up to 2% in FY21. The company aims to achieve 8% revenue contribution by end FY25.
Currently Dollar has relatively weak presence in revenues from South India (7%) compared to other regions like North (44%), East (24%) and West + Central (25%) . Hence focus will be on South region through Lakshya. The company has completed Karnataka and Telangana is currently underway with next target as Kerala and Tamil-Nadu. The management indicated south potential increase to 12% in revenues.
*Thanks & Regards*