Sharekhan's research report on Indigo Paints
Indigo Paints Ltd’s (IPL’s) numbers were a mixed bag as revenue grew by 12.9% y-o-y to Rs. 325.5 crore (below our expectation of Rs. 356 crore) while OPM expanded by 339 bps y-o-y to 22% (ahead of our expectation of 19.6%). PAT grew by 40.7% y-o-y to Rs. 48.7 crore. Capacity expansion in water-based paints, foray into waterproofing and construction chemicals, distribution expansion and brand-building initiatives will help revenue to clock a CAGR of 19% over FY2023-2025E. OPM would improve to 21% in the coming years aided by correction in input prices, better product mix, lower spends on A&P as a percentage of sales and higher contribution from differentiated products.
Outlook
Stock trades at 43.2x/35.7x its FY2024E/FY2025E earnings. We maintain Buy with a revised PT of Rs. 1,700.
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