Sharekhan's research report on Indigo Paints
Indigo Paints Limited (IPL) posted good performance in an inflationary environment. Revenue grew 13% y-o-y (largely a price led growth) and OPM improved 176 bps y-o-y to 18.6%. PAT grew 39% y-o-y to Rs. 34.6 crore. IPL has shifted focus on improving reach/output per dealer in Tier 1 and Tier 2 towns. The company targets to grow 2x the industry in the medium term with revamped focus on large towns and steady growth in smaller towns. Revamped strategy is unlikely to impact profitability. Margins will gradually improve post correction in input prices and because of better operating leverage in the medium term.
Outlook
IPL’s stock price has corrected by 38% from its high and is currently trading at 52.3x and 37.7x its FY2023E and FY2024E earnings. We maintain Buy with a revised PT of Rs. 2,250
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