Cairo - Mubasher: Pharos Research has maintained their fair value (FV) for Domty at EGP 10.12, with an Overweight recommendation.
The research firm added in a recent report that despite gaining market share, the Arabian Food Industries Company’s (Domty) price hike did not compensate for volume decline resulting in weak revenue growth, as revenue by around 1.8% compared to the previous quarter, which is due to sequential price increases of 14% in their top selling carton packs and a 23% increase in juice prices.
“The silver lining though seems to be that volumes declined at a slower pace than competitors as research conducted by Retail Zoom states that Domty has increased its market share by 3%, which is not a big surprise as their products are positioned at a slightly more competitive price point than their competition and this marginal difference can have a big baring on the price sensitive Egyptian consumer,” the report indicated.
“Despite sequential improvements, margins are still off historical norms. Management have expressed that they did not expect margins to recover to historical levels, as price increases were gradual and they only covered the hike in their raw material costs.”
“Management have stated that another price increase is taking course during Q2-17 with a further 15% increase coming to some of their goods which should reflect positively on margins in Q2-17 and beyond,” the report further explained.
