Sirca Paints - Long-Term Prospects Remain Positive: HDFC Securities

HDFC Securities Retail Research

Starting with a fairly simple business model of importing PU products, repacking and selling it through its distribution network, Sirca Paints India Ltd. has become one of the leaders in northern India for wood coatings. To add to its product kitty, the company has launched melamine, NC products, and economical PU products under Unico brand for which it has set up an in-house manufacturing unit.

Besides this, it has strategically forayed into wall paint segment. In FY21, Sirca has signed an exclusive distribution agreement with Durante and Vivan (for adhesives and for super luxury paints). This now completes Sirca’s product kitty which includes everything from putty to wall paints, economical and premium wood coatings along with adhesives.

In the next two quarters, the company will be focusing its efforts on adding new manufacturing units in South India, to help cater to the Western and Southern Indian markets which it expects to commission before the end of H1 FY24.

Going ahead we expect the company to report sales/ Ebitda /profit after tax compound annual growth rate of 30%/40%/40% respectively over FY22-25E on the back of strong growth across categories driven by-

1. rapid distribution expansion,

2. hiring of experienced industry professionals leading to improved efficiencies and fast track growth,

3. a sharp focus on upgrading the IT, ERP, and digital systems and

4. operating leverage with improving efficiencies.

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