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Dolat Capital Report
Indigo Paint Ltd.'s Q2 FY22 results were below our estimate due to delayed monsoon withdrawal and significant raw material inflation. Nevertheless, sharp demand revival in Kerala (Indigo's largest market) in August-September 2021 from weak sales in July 2021 was encouraging.
Gross margin contracted 850 basis points was in line with Asain Paints Ltd., Kansai Nerolac Paints Ltd.
Indigo Paints implemented price hikes in last 10 months to mitigate the impact and will be taking further price hikes in November 2021 (average ~8-9%).
Emulsion category, which contributes ~43% to topline, grew better than other categories with value/volume of 41/24%.
We believe that the margins would remain under pressure in the near term due to raw material and high advertising and promotional spends, but improve post festive season with calibrated price pass on.
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