Sharekhan's research report on Indigo Paints
With a differentiated product portfolio and bottom-up approach, IPL is emerging as one of India’s fastest growing paints companies. Revenues and PAT clocked a CAGR of 22% and 71% over FY2018-21. Gross margins are highest among peers at ~48% led by IPL’s locational advantage and healthy mix of revenues from differentiated products. Better working capital management has kept net working capital cycle low at 13-14 days. Operating cash flows (OCF) improved from Rs. 42.8 crore to Rs. 101.4 crore over FY2019-21.
Outlook
We initiate coverage on Indigo Paints Ltd (IPL) with a Buy and assign a target price of Rs. 3,305. Differentiated business model, excellent return profile and strong structural growth outlook will keep valuation at a premium of 60x/44x its FY2023/24E earnings versus peers.
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