Buy Indigo Paints; target of Rs 1700: Motilal Oswal

Motilal Oswal is bullish on Indigo Paints has recommended buy rating on the stock with a target price of Rs 1700 in its research report dated August 07, 2024.

Broker Research

August 08, 2024 / 15:35 IST

BUY

26 Aug, 2025 12:21

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Motilal Oswal's research report on Indigo Paints

INDIGOPN’s standalone sales growth decelerated to 6% YoY (from 12% in 4QFY24 and 18% in FY24) due to subdued industry sales (down 2% YoY) and demand weakness in Kerala (~25% revenue mix). Apple Chemie (subsidiary) clocked robust sales growth of 47% YoY, which resulted in consolidated sales growth of 8% YoY to INR3.1b (5% miss). Consolidated GM contracted 70bp YoY/230bp QoQ to 46.6% (est. 48.3%) due to high discounts, increase in RM prices and price cuts. Employee costs were up by 24% YoY (+130bp), further denting operating performance. EBITDA margin contracted 180bp YoY/670 QoQ to 15.2% (est. 18.4%).

Outlook

Given the relatively small scale of INDIGOPN (INR13b revenue in FY24) in the large paints industry, the company has been able to grow much faster than the industry. Rising brand acceptance by consumers and the expansion of its distribution network have been driving the outperformance. However, the changing competitive landscape will be a key monitorable. We reiterate our BUY rating with a revised TP of INR1,700 (40x Jun’26E EPS).

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