Domty reported weak 3Q16 results, with headline earnings falling 72% Y-o-Y on severe FX-related margin pressures, as well as the accelerated shift away from sales through agents. While revenue momentum improved significantly after last quarter’s lacklustre outcome (+3%), the margin decline was more severe. We currently do not have quarterly estimates due to lack of historical quarterly financials. Top-line was up an impressive 36% Y-o-Y, as cheese revenue (c87% of total) rose 47% (driven by volume growth north of 30% plus 15%+ price increases), offsetting a decline in juice revenue (-7%) on severe competition, and as new capacities were added at quarter-end. Headline gross margin fell c8pp Y-o-Y, with gross profit dropping 4% Y-o-Y weighed down by EGP devaluation and FX shortages that were not fully matched by price increases. The decline in juice margins was more severe (-11pp vs. -8pp for cheese), likely due to its higher FX components. EBITDA margin eased a more significant c9pp Y-o-Y, with EBITDA falling 39% due to a continued surge in SG&A costs (+59%) on increased marketing spend (2x to cEGP20mn), as well as higher salaries and wages, as the company aggressively replaced third-party agents with its own sales force.   While we are encouraged by the strong revenue/volume outcome despite relatively aggressive price increases in the quarter, the severity of the margin drop is a concern. However, we expect margins to recover gradually, as more price increases are rolled out. We have a Buy rating on the stock, as it is trading at a discount to dairy names on normalised earnings. (Earnings release, Hatem Alaa, Nada Amin)   Domty: EGP7.69 as of 15 November 2016, Rating: Buy, FV: EGP10.20 per share, MCap: USD143mn, DOMT EY / DOMT.CA