ICICI Securities's research report on Sun Pharmaceutical Industries
Indigo’s strategy 2.0 has continued to yield strong results with market share gains for straight fourth quarter. We are also enthused by (1) the company has materially increased the investments in waterproofing and construction chemical business. It has rolled out ‘Indigo protect plus series’ with multiple products and Mahendra Singh Dhoni as brand ambassador. Apple Chemie is now rolled out through additional eight states. (2) It has expanded dealer and tinting machine network by 9.8% and 19%, respectively YoY. We model maturity of these new stores to result in higher revenue growth in FY25-26 and (3) The revenue-per-store is up 7.4% YoY. While there is downtrading in overall paint industry with higher off-take of low-priced products, we like Indigo has reported 13.7% YoY volume growth in emulsions.
Outlook
We expect 8.7% revenue and 9.8% adj. PAT CAGRs over FY24–26E. We see EBITDA margin improving to 28.9% with improving revenue mix towards specialty. The stock currently trades at a pricey 34.1x FY25E and 30x FY26E earnings; and EV/EBITDA multiples of 23.6x FY25E and 20.5x FY26E, which curbs potential upside from its current levels. We retain our HOLD rating on the stock with a higher target price of INR 1,463 (earlier INR 1,400) based on 28x FY26E EPS (27x FY26E earlier).
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