Motilal Oswal's research report on Indigo Paints
INDIGOPN reported an in line set of earnings at the sales and gross profit level. While EBITDA margin appeared to be below our estimate, this was largely due to the bifurcation of IPL ad spends over two quarters in FY22, as the league was played in two phases, unlike the full impact being seen in 1QFY23. Sales and margin are expected to improve in subsequent quarters. While it is too early to comment on the potential impact of the company’s newfound aggression on Tier I and II centers (announced only in 4QFY22), a potential recovery in rural India augurs well for their erstwhile core regions. We maintain our Buy rating on its higher than the industry sales growth outlook, differentiated product portfolio, and less challenging valuation multiples compared to its peers.
Our outlook on the stock remains positive as the management continues to deliver on its above-mentioned strategy. We maintain our Buy rating with a TP of INR1,800 (45x Jun’24E EPS).
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