Brokerage firm Prabhudas Lilladher has kept its 'Buy' rating on stationery maker DOMS Industries following its second-quarter earnings. Despite a strong revenue jump, profits fell due to raw material inflation and one-time costs from flood damage in Gujarat. Investors are now watching the company's ongoing capacity expansion at its Umbergaon facility for signs of a profit recovery.
Prabhudas Lilladher has maintained its positive outlook on DOMS Industries, sticking with a "Buy" rating following the company’s latest financial report. This decision comes as the stationery brand navigates a period of uneven profitability caused by both broader economic pressures and specific operational setbacks.
In its second-quarter results for the fiscal year 2027, announced on November 2, 2026, DOMS Industries reported a solid revenue increase of 17.6% year-on-year, reaching ₹667.8 crore. This demonstrates consistent demand for its stationery products. However, the bottom line told a different story, as net profit fell by 36.2% to ₹37.2 crore.
A primary reason for this decline was a one-time loss of ₹10.4 crore linked to flood damage at the company’s manufacturing sites in Gujarat. Additionally, the company faced significant inflationary pressures on raw materials. Consequently, the operating profit margin, or EBITDA margin, contracted by 500 basis points to 12.4%. While this drop reflects current cost pressures, analysts at Prabhudas Lilladher view this as a temporary phase rather than a sign of a structural decline in the business.
Strategic Capacity Expansion
A key factor supporting the brokerage’s outlook is the company's growth strategy. DOMS Industries is actively scaling its production capabilities at its 50-acre Umbergaon facility. The commissioning of the first building is expected to contribute to revenue starting in the third quarter of fiscal year 2027. This expansion is designed to help the company meet higher demand and potentially improve efficiencies as the new manufacturing lines become fully operational.
Investor Monitorables
Investors may keep an eye on how effectively the company ramps up its new manufacturing capacity and whether it can stabilize its profit margins in the coming quarters. The company currently maintains a strong balance sheet with a low net debt-to-equity ratio of 0.02x, which provides financial flexibility. The main focus for shareholders will be on recovering from the recent inflationary and weather-related headwinds. Future quarterly updates will be important to confirm if the expected recovery in profit margins is on track as raw material costs normalize.