In an interaction with Moneycontrol, Ekansh Mittal, founder of Katalyst Wealth, shares his stock pick for this Diwali. He terms the innerwear company-Dollar Industries-as his Diwali gift for medium-to-long term investors.
“There are primarily three or four large companies. One is obviously Page Industries, which is very well known and there has been a huge wealth creator. But down in the mid premium segment or mass market segment, there are three major companies Dollard, lux, and Rupa,” he said.
Dollar Industries is primarily engaged in manufacturing innerwear for men, women, and kids. The company also manufactures Athleisure, kids wear, along with thermals or winter wear and lounge wear.
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The company has an extensive product portfolio and markets its products under Dollar Man, Dollar Woman, Dollar Junior, Dollar Always and Dollar Thermals to cater to the requirements of all classes of people. It has a distribution network of over 1,100 dealers and over 1.2 lakh retailers, according to CARE Ratings.
Earlier Dollar Industries was largely in the mass market segment but over the last five-six years, it has been gradually trying to move up the value chain. Additionally, it has widened its product portfolio to include products related to women, children and thermal from men’s innerwear earlier, which indicates that the company has been growing consistently albeit not at a very rapid pace, Mittal explained.
He also highlighted, “The other plan was that it is looking to expand their margins as well through a combination of factors that is like moving up the value chain introducing new products like Athleisure, which command high margin, and introducing higher, slightly new premium products where it could command higher ASP (average selling prices), and also trying to reduce capping their advertisement expenses to a certain extent, because the main thing that it is looking for was revamping its distribution network”.
Another factor that Mittal liked about Dollar Industries is that the company plans to double their turnover from roughly Rs 1,000 crore in FY21 to almost Rs 18,000 crore by FY25.
In Q1 FY23, Dollar Industries’ revenue grew by around 76.7 percent YoY to Rs 3,614 million led by a volume growth of about 54 percent YoY and the rest of the growth was on account of increase in average selling price due to price hikes taken by the company in order to pass on increase in cost of raw materials, analysts said.
“The growth in Revenue was driven mainly by our flagship brand Dollar Man and Dollar Always. Adding on to this, our Dollar Woman brand also did significantly well along with premium brand Force Nxt. The Company's latest offering of Brassiere product range under Dollar Woman brand has opened a new gate for the women product segment and has received good feedback from the market. We are sure that it will help us capture a reasonable share of the market in coming years,” said Vinod Kumar Gupta, Managing Director, Dollar Industries.
The management has guided for a topline growth of 15-17 percent in FY23 with EBITDA (Earnings Before Interest Depreciation and Amortisation) margin in the range of 17-18 percent. It also aims to reduce working capital days by 10-12 days driven by improvement in receivable days.
Further, reasonable stock valuations has also made Mittal optimistic about Dollar Industries being a good investment bet.
The stock has risen 182 percent in the past three years and is up close to 20 percent so far in 2022. On Friday, the stock ended down 0.7 percent at Rs 497.40 on the BSE.
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