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ICICI Securities Report
While Indigo Paints Ltd.'s Q2 FY23 results were largely in-line with our estimates, we believe consensus was positively surprised. In-spite of headwinds like prolonged rainfall which impacted exterior emulsions, we note Indigo's revenue growth (23.7% YoY) was higher than Asian Paints Ltd. (19.4%) and Kansai Nerolac Paints Ltd. (19.2%).
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We reckon Indigo Paints outperformed peers by ~10% on a like-for-like basis in India decorative paints.
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It also reported Ebitda margin expansion of 200 basis points versus Asian Paints 197 bps and Kansai 28 bps YoY.
We believe green shoots of strategy 2.0 to focus on 750 towns to grow at two times industry growth rate are visible now. The revenue/ dealer is up 9% YoY.
Indigo Paints has also added 232 dealers and 281 tinting machines during Q2 FY23. While we model visible benefits of strategy 2.0 in FY24, increase in competitive intensity will likely keep valuation multiples under check.
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