Indigo Paints Q2 Results Review - Attractive Valuations; Upgrade To 'Accumulate': Dolat Capital

Dolat Capital Report

Indigo Paints Ltd.’s Q2 FY24 results came below our estimate. Revenue growth in Q2 FY24 was better compared to peers - Asian Paints Ltd.(+0.2%), Berger Paints India Ltd. (+3.6%) and Kansai Nerolac Paints Ltd. (+1.3%).

At the segmental level, cement paints and putty (+47.9%) and primers and distempers (+26.6%) performed better compared to other segments.

Indigo Paint's gross margin expanded 400 basis points to 45.7% as a result of softening in raw material prices. However, Ebitda margin expanded by mere 150 bps was lower compared to Asian Paints (+570 bps), Berger Paints (+350 bps) and Kansai Nerolac (+360 bps).

We have downward revised our FY24/25E earnings per share by 4.6/4.7% at Rs 30.2/38.4 to factor in Q2 performance and introduced FY26E at Rs 48.7.

Valuing the stock at 33 times FY26E EPS arrive at a target price of Rs 1,607. Due to the recent fall in the stock price, Upgrade to 'Accumulate'.

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