Indigo Paints' net sales grew by a mere 0.3% YoY to Rs 3.7 billion in Q4 FY25 due to subdued demand conditions. Gross margin contracted by 180 bps YoY to 47.4%. A 180/50 bps increase in raw material/employee exp was fully offset by a 320 bps decline in other expenses, respectively.
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Indigo Paints Ltd.'s Q4 FY25 revenue and Ebitda were below, however, adjusted profit after tax was in line with our estimates. Revenue grew by a mere 0.3% due to sluggish consumer demand. However, performance was still better compared to the leader, i.e. Asian Paints (-4.3%). Management is optimistic that a rebound in demand could drive growth back to double digits.
Gross margin contracted by 180bps to 47.4% due to higher discounts. Nonetheless, Ebitdam expanded by 90bps YoY to 23.4%, led by a 320bps reduction in other expenses.
Margin performance was better than Asian Paints (-220bps) and Kansai Nerolac (-100bps). Going ahead, the company expects further improvement in Ebitda margins in FY26E.
We downward revise our FY26/27E EPS by 4.5/4.8% to Rs. 35.9/44.3 to factor in Q4 performance. Going ahead, we believe that Indigo Paints will continue to outpace its peers given low base and penetration opportunities.
Valuing the stock at 26x FY27E EPS, we arrive at target price of Rs 1,151 (Rs 1,394 earlier). Considering the recent fall in stock price, we maintain our ‘Accumulate' rating.
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