Dollar Industries Ltd  Q1 FY23 Result Updates. Volume growth to increase revenue.

Dollar Industries Ltd  Q1 FY23 Result Updates.

Volume growth to increase revenue.

Dollar Industries Ltd  reported revenue in Q1FY23 grew by 76.7% YoY which was led by a volume growth of 54% YoY & 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.

In Q1FY23, the company reported a 76.7% YoY increase in sales to Rs 3,614 mn, which was led by a healthy volume increase of 54% YoY. Growth in volumes was mainly led by compay’s flagship brands Dollar Man and Dollar Always.

Gross margin for Q1FY23 declined by 573 bps YoY at 33.9%. Decline in gross margin was due to increase in raw material cost, which company was not able to fully pass on to the customers. However gross margin improved by 173 bps QoQ.

EBITDA margin for Q1FY23 declined by 697 bps YoY at 10.3%. Decline in EBIDTA margins was mainly led by decline in gross margin. Advertisement expenditure for Q1FY23 was at 9.7% vs 7.2% YoY of sales.

Company reported PAT of Rs 270 mn up 19.6% YoY helped by a lower tax rate of 14.3% vs 25.6% YoY. PAT Margin was at 7.5% vs 11% YoY.

Growth driven by project Lakshya.

In Q1FY23 revenue contribution from different segment- economy-38%, mid-premium50%, premium-12%. Company has taken a price increase of 4.5% in April 2022. Further due to recent correction in cotton prices from the peak company does not plan to take any further price increase in the short term. Revenue contribution by category for Q1FY23: Dollar Man-47%, Dollar Always-40%, Dollar Women-9%, Force Next-3%, Force Gowear-1% . Breakup of revenue for Q1FY23 geography wise: North-44%, West-21%, East-26%, South-9%.  Share of revenue from Mordern Retail was 4%.

 Currently company is exporting to 15+ countries and export mix was 8% of revenue in Q1FY23, target is to increase export markets and increase share of exports to 11% of revenue by FY25.

 In Q1FY23 contribution of athleisure wear was 14% of sales, management expect strong growth in the athleisure wear segment to continue going forward.  In Q1FY23 company incurred advertisement expenditure of Rs 350 mn ie 9.7% of sales as compared to Rs 146 mn ie 7.2% of sales in Q1FY22. Advertisement expenditure in Q1FY23 was mainly on sponsoring IPL 2022 (nonrecurring), launch of new TVC for Dollar Woman and the campaign for completion of 50 glorious year of Dollar Industries Ltd.

 In Q1FY23 14% of domestic revenue contribution was from distributor under Lakshya.

In Q1FY23 company has improved its net working capital days by 47 days YoY to 172 days. However, it has increased by 18 days as compared to Q4FY22 mainly due to increase in inventory days led by increase in procurement of winter products as the demand for it would start from Q2FY23.

The shares of Dollar Industries Ltd  are trading at Rs. 468.60, up  by 9.47%.

Valuations:

The return on equity (ROE) is 23.9% for the quarter ended June 2022. The price-to-earning (P/E) ratio stood at 17.4. The return on capital employed (ROCE) for the company is 26.8%. The price to book value of Dollar Industries Ltd  is 3.92. The EV/EBITDA is 12.4. EPS during the quarter came at Rs. 26.6.