Broker’s call: Indigo Paints (Buy)

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Target: ₹1,594

CMP: ₹1,400.10

Indigo Paints Ltd (IPL) ranks as India’s fifth-largest decorative paint manufacturer by revenue in FY24. The Company specializes in a diverse range of paints and allied products, including emulsions, enamels, wood coatings, distempers, primers, putties, and cement paints. IPL operates five manufacturing units with a total capacity of nearly 160,000 KLPA for liquid paints and around 138,000 MTPA for putty and cement paint.

The company’s extensive distribution network comprises 53 depots, serving 18,105 active dealers, and is supported by 9,842 tinting machines nationwide as of FY24. Recently, IPL inaugurated a new water-based paint facility in Tamil Nadu and is expanding its solvent-based and water-based paint capacities in Rajasthan.

Furthermore, in April’23, IPL acquired a 51 per cent stake in Apple Chemie India Pvt. Ltd to diversify into the waterproofing and construction chemicals segment, targeting the B2B market. We believe IPL will continue to witness 18 per cent growth in its existing business, along with improvement in margins due to operating leverage.

We initiate our coverage on IPL with a Buy rating and a target price of ₹1,594. Over the years, IPL has emerged as a formidable player in the Indian paint industry, challenging the dominance of established competitors since its inception in 2000. The company has consistently achieved growth rates of 2-2.5x compared to its peers.