FILA S.p.A.: Core Business Almost Free, DOMS Covers The Rest

EXECUTIVE SUMMARY

• Hoop Club has taken a long position in FILA S.p.A. (“FILA” – ISIN: IT0004967292), global market leader in the creative tools industry listed on the Milan Stock Exchange.
• FILA has quietly completed a multi-year transformation: debt is down, margins are up, and its early-stage bet on DOMS has become a listed Indian growth story.
• Yet the market narrative remains stuck in the past. The stock still trades at repressed multiples, disregarding FILA’s cash-generating capabilities (around €40-50m in normalised annual free cash flow), and the strategic competitiveness and financial opportunity represented by DOMS Industries.
• The company owns a 26% stake in DOMS Industries Ltd., a listed Indian stationery leader worth ~€396m at current market value (€1.52bn mkt cap). This stake alone nearly matches FILA’s total market capitalisation today.¹
• A simple Sum-of-the-Parts highlights the mispricing: ¹
  • DOMS stake ≈ €396m
  • FILA Market Cap ≈ €460m
  • => Core business implied at only ~€64m (i.e. total Mkt Cap minus DOMS stake) → valued at < 2x EV/EBITDA and yielding an FCF yield > 70%.
• The market has completely missed the story: DOMS is priced neither as a financial asset nor as a strategic asset. We propose two ways of evaluating the group:
  • View I: DOMS is considered a financial asset: even applying a steep 50% Holdco discount, FILA trades at ~3.2x EV/EBITDA with >25% FCF yield – multiples rarely seen for a stable, global franchise.
  • View II: DOMS is primarily a strategic, industrial asset: DOMS underpins FILA’s growth strategy, supplying entry-level products for Europe and holding exclusive FILA distribution rights in India and parts of Asia. This hybrid model combines cash-generative stability with emerging market growth. An eventual business combination of the two players is increasingly likely.
• In both scenarios, even a partial market recognition of DOMS’ value and FILA’s cash flows would justify a 2x re-rating.
• In our view, the market is still pricing 2020, not 2025.

We would like to thank our friends at Auriga Partners SA for the valuable sparring sessions and insightful discussions that supported the development of this Position Paper.

BACKGROUND: FILA – THE GROUP BEHIND THE WORLD’S MOST FAMOUS PENCIL

FILA (FILA:IM) is a global leader in the pencil and fine arts supply industry, with operations spanning over a century. Headquartered in Pero, near Milan, the company specialises in the manufacture and distribution of graphite and coloured pencils, along with a wide range of creative tools.

Today, the company is present in over 150 countries, holding strong market shares – especially in the US and European markets – supported by a diversified global supply chain.³

American or European readers will most likely recognise one or more brands which are part of the Group. The global brand portfolio includes well-known local brands, including Dixon Ticonderoga best-known for their iconic Ticonderoga Yellow Pencils, a U.S. category leader, Lyra the historical German brand many children grew up with in school, and Giotto – a household name for every Italian family.

The Group was established in 1920 in Florence, Italy. FILA, an acronym for “Fabbrica Italiana Lapis ed Affini” (i.e. “Italian Factory for Pencils and Utensils”) becomes an important Italian pencil and crayon manufacturer with its FILA and GIOTTO-branded products being used for education and artistic expression among Italian schoolchildren and artists.⁵

A key turning point came in 1994 when Massimo Candela – representing the third generation of the entrepreneurial family – took over as CEO. Under his leadership, FILA began pursuing a bold international strategy: aiming to become the main global player in the design, production and marketing of creativity tools for children, and later on, for professional and hobbyist artists alike.⁶

Since 1994, the company has progressively evolved from a local player to an established global point of reference in its industry. In 2005, FILA acquires Dixon Ticonderoga, the American producer of writing instruments, art materials and office products based in Heathrow, Florida, and, at the time of the acquisition, one of the oldest publicly held companies in the United States with operations dating back to 1795 (its ticker was DXT:US).⁷

Through Dixon, FILA expands its reach across the pond, both in terms of consumers and production, with a highly recognisable traditional American brand.

Subsequent acquisitions follow the same rationale: consolidate a highly fragmented and local market with well-known local brands using its specialist know-how to harness production and market synergies.

In 2015, FILA is listed on the Italian stock market through the Special Purpose Acquisition Company “Space S.p.A.”.⁸ As outlined in FILA’s presentation at the time,⁹ sales revenues are mainly European but its ambitions are clearer than ever:

Grow fast, focus on efficiency, generate abundant free cash-flow.

FILA’S COLOURFUL EQUITY HISTORY

The story of FILA is of immediate appeal for investors: a historic company with increasing margins in a consolidating market, strong capabilities in generating cash, proven M&A record and, probably most-importantly, a respected and highly regarded CEO communicating well with the market.

The listing becomes the trampoline for an immediate series of acquisitions; 2016 marks an important year for the company, adding four well-established brands – Canson: French manufacturer of fine art paper; Daler-Rowney: specialised in acrylic oil and pastels; Lukas: historic German art supply manufacturer, praised by artists, including Vincent van Gogh; St Cuthberts Mill: art paper producer active since the 1700’s – to its product portfolio and expanding considerably in the art supply sector.

The market rewarded FILA: by the end of 2017 the stock is up more than 80% since its listing¹¹ and the company is one of the most coveted in the Italian small-mid-cap sphere. That was all about to change in 2018, with a perfect storm approaching.

The year 2018 marks a significant year for FILA. Disputes between brother and sister of the Candela family escalate to an all-out battle for the minority stake (34%) of FILA’s parent company Pencil Srl.¹² Rumours of activists Elliott Management’s involvement and a subsequent legal battle against the eventual acquirer, a fund named Blue Skye known for activist special situation deals, created uncertainty around FILA’s governance.¹³ The dispute will be resolved completely in 2022 with Candela acquiring the full ownership of Pencil Srl,¹⁴ yet the events were indisputably traumatic for a public company like FILA.

In June of the same year, FILA acquired Pacon Holding Company, its biggest acquisition yet valued at 325 million USD and funded by a 520 million Euro debt package.¹⁵ Pacon is a leading arts and craft supplier headquartered in Appleton, Wisconsin, and its acquisition was a fundamental stepping stone in Candela’s vision to expand the group’s footprint in the United States. At the time of the acquisition, Pacon was generating around $500 million in revenues and had a product range of over 8.500 items.

To immediately lower the debt burden, FILA’s Board approved a capital increase of 100 million Euro, which closed – fully committed – in March 2019.¹⁶

Yet, despite the highly tumultuous year for the group and for the financial markets – it is worth noting that 2018 was the year of Trump Tariffs 1.0, Theresa May’s botched Brexit deal, volatile oil¹⁷and tech markets and Italy’s budget crisis – FILA’s stock was defending itself rather well.

Then COVID-19 hit.

There is no need to extensively delve into the disrupting effects of a global pandemic on a company deriving more than half of revenues from the school & office sector. Investor sentiment was expectedly shaken and the large debt burden, which reached over 5x EBITDA by the end of 2020,¹⁸) certainly did not help investor confidence.

Investors, already shaken by shutdowns of schools & offices, global supply chains and an overall foggy outlook, were promised a cash-generating stock in a stable mature market. Instead, they found themselves stakeholders of a highly leveraged company in a market that has essentially halted from one day to another.

The following years did not immediately restore investor confidence in stocks in general, let alone one in FILA’s position, due to well-known factors such as the: Russian invasion of Ukraine, European energy prices, stagflation fears, recessions, and Trump 2.0.

Despite all this, FILA’s management worked in the background on getting things back on track, and fast. Their focus was to deleverage by exploiting synergies and efficiencies, using cash to rapidly lower the debt burden. Unbeknownst to all, an investment they made in 2011 in an Indian company named DOMS Industries would play a key role on getting things back on track.

DOMS INDUSTRIES: CREATING ASIA’S FASTEST-GROWING CONSUMER STAPLES UNICORN

In 2011, FILA starts looking with interest at the Indian market. Candela strategically recognised the potential of stepping into India, a country with (at the time) considerably higher fertility rates (at 2.53 births per woman vs. Europe’s 1.59 and North America’s 1.89 births/woman).¹⁹

A regional school stationery player named DOMS Industries Ltd. led by Santosh Rasiklal Raveshia with a local manufacturing structure and a well-established distribution network caught his interest.

Seeing the potential for FILA in gaining market-share in the rapidly expanding but largely overlooked Indian market due to its geographical vastness and fragmentation, Candela decides to invest 41m Euro in DOMS for the controlling majority of the company (51%).²⁰

While we haven’t found any public statements from Massimo Candela on DOMS CEO Santosh Rasiklal Raveshia, the partnership between the two leaders speaks for itself.

Under Raveshia’s leadership and with strategic and operational support from Candela and his team, DOMS evolved from a low-margin supplier into one of India’s leading branded stationery firms.This was done by a strong collaboration between the companies, leveraging FILA’s centenary know-how in manufacturing premium pencils and DOMS’ local production and distribution capabilities.

The timing proved ideal: as DOMS scaled, Indian consumers – with a rapidly growing middle class – upgraded to quality tools.²²

The collaboration helped DOMS unlock a new growth phase, culminating in a successful IPO and a plan to double capacity by 2025.

Financially, the DOMS investment has been a home run: the IPO allowed a €80m cash-out²³, and the current 26% stake held by FILA is worth around €400m today.²⁴ DOMS will replace FILA’s Chinese production by 2026 as it doubles capacity – transforming from a local supplier into FILA’s strategic manufacturing engine.

DOMS is further expected to continue to grow aggressively, expanding its market-share as competitors struggle to keep prices and quality in check, and looking to eventually venture in baby- and child-care products to become a local childcare conglomerate.²⁵

Over the next few years, FILA will distribute DOMS-manufactured goods – including some under the DOMS brand – across Europe.²⁶These competitively priced products, made in India, will enable FILA to reclaim market share in the low-cost segment from Chinese and private label competitors. Symbiotically, DOMS will start exclusively distributing FILA’s brand in India, as well as continuing their strong relationship in sharing know-how, industrial capabilities and quality-driven product development.

This reinforces DOMS not just as a financial asset, but as a key industrial partner for FILA’s European strategy.

Candela currently sits on the board of DOMS and retains material influence through FILA’s governance rights, including the nomination of the company’s chairman.²⁷ The shareholder agreement between the companies stipulates that FILA retains its governance rights with at least 20% of share capital ownership, meaning that they could sell around 6% of the stake without losing current governance rights.

DOMS Industries is an impressive company in its own right and we encourage every reader to look closer into the company.

THE FILA GROUP TODAY: A POCKET-SIZED MULTINATIONAL CORPORATION IN A FRAGMENTED MARKET

Today, FILA is a consolidated global player in its market segments. According to management, the company holds:

• Over 50% market share in the graphite pencil segment;
• Approximately 60% of the French and over 20% of the Spanish school paper markets;
• More than 50% of the European market for pencils, coloured markers, and pastels.

On the fine art side (a market valued at around 1 billion Euro), FILA covers over 50% of the global fine art paper market.²⁹We recommend reviewing Q3 2024 Results & Capital Markets Presentation, which provides detailed insight into market trends, brand positioning, and competitive dynamics across the Group’s segments. The presentation marks a notable improvement in the company’s investor communication and reflects a deliberate effort to re-engage the market with a clearer articulation of its strategy.

Below, a few slides from FILA’s 2020 company presentation with a few key figures: (Note: The numbers and brand positioning take into account DOMS (which was consolidated into FILA’s accounting up to FY2023 results, before the ownership was reduced from 31% to 26% at the end of 2024). Volumes may partially reflect legacy reporting.)

FILA is thus a well-positioned player in two market segments, each with distinct characteristics that can be summarised as follows:

The company is highly reliant on the school & office segment, accounting for around 67% of revenues (with a strong focus on school supplies like paper, drawing and writing tools).³⁵ The Fine Art segment occupies roughly 29% of the revenue mix through its premium paper and artistic product offerings.³⁵ The remaining ~4% of total revenues come from “industrial” offerings somewhat distinct from the more retail-focused segments, such as B2B high-end paper offering for printing or niche applications.³⁵

To satisfy global demand, FILA has a structured global supply chain with a total of 22 production facilities and 32 sales subsidiaries scattered globally. In FILA’s FY2024 Financial Statement, the company report displays the following map:

Around 50% of production is “local for local”, meaning that local demand is primarily satisfied by nearby facilities. This fragmented setup is the result of the company’s M&A-driven growth over the past decade.

Today, FILA is executing on its 2025-2029 operational rationalisation plan to streamline production: by 2026, the company will have exited manufacturing operations in China, reallocating capacity to India and a new facility in Cambodia.³⁶ In parallel, FILA is evaluating plans to consolidate its European manufacturing footprint, potentially reducing the number of sites.

Readers may rightly notice that India is not indicated on the map which refers strictly to the FILA group and to its (consolidated) subsidiaries. The Indian piece – DOMS Industries Ltd. – is not in the consolidation scope of FILA anymore, however, as outlined in the 2025-2029 strategic plan mentioned above, the Indian growth engine represents a crucial centrepiece in FILA’s strategy and future growth.³⁷

OUR VIEW: HOW FILA SHOULD BE EVALUATED

Looking at FILA and DOMS, we believe the value of the stake in the Indian company can be summarised in three short pillars:

Based on these pillars, we propose two scenarios for FILA’s valuations:

SCENARIO I: FILA is a Cash-Cow; DOMS is a Financial Asset.

• Current Market Value of FILA’s stake in DOMS: ~€396m
• FILA’s implicit Enterprise Value when detracting the stake in DOMS: ~€185m (Market Cap: ~€54m)

FILA’s valuation multiples netted by the stake in DOMS:

• EV/EBITDA_2025e: 1.6x
• FCF Yield_2025e: 78.8%

Even applying an extremely prudent discount of 50% on the stake in DOMS, valuations of FILA’s core operations remain ridiculously contained (EV/EBITDA = 3.9x; FCF Yield = 19.1%). Let’s remember that FILA has revenues of around €600m and EBITDA reaching €100m, as well as a leverage of mere 1.2x EBITDA (excluding IFRS16).

SCENARIO II: FILA is not a mere Cash-Cow; DOMS represents the Growth-Aspect of the Group.

• ROCE_{FILA, 2024}: 7.85%
• ROCE_{DOMS, 2024}: 24.30%
• ROCE of FILA considering its 26% stake in DOMS: 14.17%

FILA’s blended ROCE is 14.17%, significantly above its cost of capital (~9-10%), and nearly double the return implied by its current valuation. Yet the market seems to value FILA as if it were a low-growth, low-return business, ignoring the DOMS uplift.

Some investors see the potential sale of a further 6% stake in DOMS as a catalyst for a re-rating. While we agree that it would likely act as a strong market trigger, the ROCE numbers suggest that FILA should actually increase their participation in DOMS to maximise returns on invested capital, thereby capitalising on the fast-growing Indian market and the strong industrial and commercial synergies with FILA.

We acknowledge the complexity of this valuation method. A more straightforward point of approach could be to simply consolidate the FILA and DOMS’ financials given their strong industrial interconnection. Acknowledging 26% of DOMS’ key financials in FILA’s valuation would mean valuing the group still below 4x EV/EBITDA multiples despite being a top performer in terms of margins and free cash flow conversion.

Either way one looks at it, a significant mispricing is there.

The takeaway, regardless of method, is clear: there is meaningful re-rating potential based solely on market realignment. The picture is even more compelling when considering the breadth and depth of synergies between FILA and DOMS (spanning products, industrial know-how, and addressable markets).

These factors make it increasingly likely that the two firms will explore extraordinary strategic options to reinforce their global leadership, including, a business combination. This possibility has already been acknowledged publicly by CEO Massimo Candela in June of this year.

We believe the most natural outcome would be a business combination in which the larger entity acquires the smaller one, potentially using shares listed on the Indian stock exchange as transaction currency. This could eventually pave the way for a dual listing of the combined group in both India and Europe.

In our view, such a combined platform would emerge as the undisputed global leader in its category, distinguished by its brand heritage, product breadth, global reach, and operational expertise.

CONCLUDING REMARKS

FILA is one of those rare companies that investors seem to have forgotten, but for all the wrong reasons. Beneath the noise of past turbulence lies a resilient, cash-generative multinational with a global footprint, iconic brands, and a long-term strategy that is quietly delivering.

The company is led by a focused and visionary majority shareholder in the form of Massimo Candela, whose strategic intuition has consistently proven to be on point, as proven by the acquisition of Dixon, securing U.S. market share, the expansion into art supply for hobbyists, which safeguarded FILA when the pandemic hit the school supply market, and the early bet on DOMS, which has since grown into an industry unicorn.

The ”perfect storm” (i.e. the governance noise, the leverage spike, the COVID overhang) that has weighed on FILA has already played out.

We acknowledge that geopolitical and market forces have changed and become a source of uncertainty, especially for a company with a global footprint like FILA. However, even stripping out near-term considerations such as FX volatility and tariff risk, what remains is a business with solid fundamentals, a strong overall posture, and a strategic partner in DOMS that delivers both financial upside and operational leverage across multiple continents.

We’ve also observed a marked improvement in FILA’s communication with the market and a clearer, more deliberate approach to business expansion, consistent with its role as a consolidated reference player in the global creative tools industry.⁴⁰

And yet the stock still trades at 3-4x EV/EBITDA. No recognition of the DOMS stake. No credit for the turnaround. No pricing in of the industrial plan already underway.

Markets don’t stay blind forever. Sooner or later, the DOMS story gets priced in or a catalyst forces it to. In the meantime, investors have a rare chance to enter a misunderstood business with global exposure, high-quality cash flows, and asymmetric upside.

The opportunity is hiding in plain sight. And the window won’t stay open forever.

Milton Friedman held up a yellow Ticonderoga Pencil and said: “No single person can make this pencil.” He was right. FILA built an empire on that truth: a global web of suppliers, factories, brands and markets.

The market still prices FILA like a commodity stationary firm. We see an undervalued system of global cooperation hiding in plain sight.

1. Note: All Stock prices have last been updated on 17/09/2025; Source: Bloomberg[↩][↩][↩][↩][↩]
2. The images used in this document have been extracted from publicly accessible content on the following domains: https://www.filagroup.it/en/the-group/brands-and-products/, and are used solely for informational and analytical purposes, with no commercial intent, in compliance with Article 70 of Law No. 633 of April 22, 1941 on copyright. All rights remain with their respective owners.[↩]
3. For more information about the company, useful resources are found on FILA’s Corporate Website, Analyst Coverage, and Wikipedia Page.[↩]
4. The images used in this document have been extracted from publicly accessible content on the following domains: Ticonderoga, Reddit, and are used solely for informational and analytical purposes, with no commercial intent, in compliance with Article 70 of Law No. 633 of April 22, 1941 on copyright. All rights remain with their respective owners.[↩]
5. Source: Company Website[↩]
6. Source: Massimo Candela’s Interview with Il Giornale, Published 01/09/2010[↩]
7. Sources: SEC Filing, Market Announcement, Wikipedia[↩]
8. Source: SPACE SPA – Business Combination Announcement (15/01/2015) [↩]
9. Source: Space-Fila: presentation of the Business Combination to the investor community [↩]
10. Source: Brand-News.it[↩]
11. Considering the SPAC price of 10€/share; Share price of December 2017: ∼ 19€[↩]
12. Source: Corriere[↩]
13. Sources: IlSole24Ore(1), IlSole24Ore(2)[↩]
14. Source: Corriere[↩]
15. Sources: FILA Press Release(1),FILA Press Release(2)[↩]
16. Sources: FILA Press Release(1),FILA Press Release (2)[↩]
17. Source: An Overview of the Crude Oil Market in 2019[↩]
18. Ratio is calculated using Net Financial Debt excl. IFRS16 effects and MTM ÷ EBITDA excl. net non-recurring charges and IFRS16 effects. Source: FILA Financial Statements – 2020, 2021, 2022, 2023, 2024[↩][↩]
19. Source: UN WPP Fertility Rate Data per country[↩]
20. Sources: DOMS Website, TimesOfIndia[↩]
21. Sources: Company Filings, Bloomberg[↩]
22. Sources: Business India, “The Unprecedented Expansion of the Global Middle Class” (2017, Working Paper), Reuters[↩]
23. As reported in FILA’s Q1-2025 results[↩]
24. Note: All Stock prices have last been updated on 17/09/2025; Sources: Bloomberg[↩]
25. Sources: The Economic Times, DOMS FY2024 Filings[↩]
26. Sources: DOMS Corporate Presentation (p. 6)[↩]
27. Sources: DOMS Governance, DOMS-FILA Shareholder agreement[↩]
28. The images used in this document have been extracted from publicly accessible content on the following domains: https://domsindia.com/rr-fila-group/, and are used solely for informational and analytical purposes, with no commercial intent, in compliance with Article 70 of Law No. 633 of April 22, 1941 on copyright. All rights remain with their respective owners.[↩]
29. Management Estimates; Source: FILA Q3 2024 Results & Capital Markets Presentation[↩]
30. Source: Elaborated data from Company Filings, Bloomberg, Intesa SanPaolo, Equita. Forward-looking estimates have been elaborated using published equity research by independent brokers.[↩]
31. Note: The numbers and brand positioning take into account DOMS (which was consolidated into FILA’s accounting up to FY2023 results, before the ownership was reduced from 31% to 26% at the end of 2024). Volumes may partially reflect legacy reporting.[↩][↩]
32. Source: FILA Corporate Presentation (2020)[↩][↩]
33. Source: FILA Financial Statement FY2024[↩][↩]
34. Management Estimates; Source: FILA Q3 2024 Results & Capital Markets Presentation[↩][↩]
35. FY23 Revenue Mix, as indicated on FILA Q3 2024 Results & Capital Markets Presentation (p.26) [↩][↩][↩]
36. Changes in US-imposed tariffs remain a closely monitored factor in the execution and potential adjustment of the rationalisation plan.[↩]
37. See FILA’s Press Release on the Approval of the 2025-2029 Strategic Plan[↩]
38. Source: DOMS-FILA Shareholder Agreement[↩]
39. Source: Bloomberg; FILA’s EV/EBITDA excluded IFRS16 effects and considered the fully diluted market cap.[↩]
40. We recommend reviewing Q3 2024 Results & Capital Markets Presentation, which provides detailed insight into market trends, brand positioning, and competitive dynamics across the Group’s segments. The presentation marks a notable improvement in the company’s investor communication and reflects a deliberate effort to re-engage the market with a clearer articulation of its strategy.[↩]