Why Indigo Paints shares rose over 15% today
Indigo Paints stock opened with a gain of 2.11% at Rs 1,983 against the previous close of Rs 1,942.50 on BSE. It rose 15.68% to an intraday high of Rs 2247.
- Dec 31, 2021,
- Updated Dec 31, 2021 12:23 PM IST
Shares of Indigo Paints rose over 15% today after brokerage Motilal Oswal initiated coverage on the stock with a 'Buy' rating. The stock opened with a gain of 2.11% at Rs 1,983 against the previous close of Rs 1,942.50 on BSE. It rose 15.68% to an intraday high of Rs 2247.
Market cap of the firm rose to Rs 10,197 crore on BSE. Indigo Paints stock trades higher than 5 day and 20 day moving averages but lower than 50 day, 100 day and 200 day moving averages.
Total 0.12 lakh shares of the firm changed hands amounting to a turnover of Rs 2.57 crore.
The mid cap stock hit 52 week high of Rs 3,348 on February 3, 2021 and 52 week low of Rs 1,900 on December 27, 2021
The brokerage said the Indian paints industry is an oligopolistic industry dominated so far by four large players. The industry has high entry barriers for newcomers as the incumbents have strong moats such as robust distribution networks, strong brand equity, and significant penetration of tinting machines. Indigo Paints is the only new entrant in the last two decades to have successfully overcome these high barriers with its patient and multi-pronged strategy, which comprises of introducing differentiated products to distinguish itself in the market.
Also read: Sensex rises 350 points, Nifty scales 17,300; Titan, Axis Bank, Kotak Bank top gainers
Over FY18-21, Indigo Paints delivered a sales/EBITDA/PAT CAGR of ~22%/68%/70%, driven by its efforts on distribution expansion, the proliferation of tinting machines, brand investments, and an improving product mix through differentiated products. We expect these initiatives to continue in the coming years as well. In addition, the company has taken 18-20% price hikes in recent months (in line with that of the industry) amid sharp commodity inflation, said Motilal Oswal.
Accordingly, the paint maker is expected to clock sales/EBITDA/PAT CAGR of 28%/ 35%/41% over FY21-24E.It further expects it to continue to do so in the coming years as well.
"On account of its strong topline and earnings growth outlook, we believe Indigo Paints deserves higher multiples in line with large peers trading at 55-60x. We initiate coverage with a buy rating, and target of Rs 2,270 (55x FY24E EPS)," the brokerage added.
The company reported a 16.71% rise in Q2 profit at Rs 13.55 crore against Rs 11.61 crore profit in the June quarter of the current fiscal.
Sales grew 25.70% to Rs 196.11 crore against Rs 156.02 crore in the previous quarter.
However, on a year on year basis, net profit fell 28% to Rs 13.55 crore against Rs 18.81 crore profit in Q2 of last fiscal. Sales rose 26.65% to Rs 196.11 crore in Q2 against Rs 154.84 crore in September quarter of last fiscal.
Shares of Indigo Paints rose over 15% today after brokerage Motilal Oswal initiated coverage on the stock with a 'Buy' rating. The stock opened with a gain of 2.11% at Rs 1,983 against the previous close of Rs 1,942.50 on BSE. It rose 15.68% to an intraday high of Rs 2247.
Market cap of the firm rose to Rs 10,197 crore on BSE. Indigo Paints stock trades higher than 5 day and 20 day moving averages but lower than 50 day, 100 day and 200 day moving averages.
Total 0.12 lakh shares of the firm changed hands amounting to a turnover of Rs 2.57 crore.
The mid cap stock hit 52 week high of Rs 3,348 on February 3, 2021 and 52 week low of Rs 1,900 on December 27, 2021
The brokerage said the Indian paints industry is an oligopolistic industry dominated so far by four large players. The industry has high entry barriers for newcomers as the incumbents have strong moats such as robust distribution networks, strong brand equity, and significant penetration of tinting machines. Indigo Paints is the only new entrant in the last two decades to have successfully overcome these high barriers with its patient and multi-pronged strategy, which comprises of introducing differentiated products to distinguish itself in the market.
Also read: Sensex rises 350 points, Nifty scales 17,300; Titan, Axis Bank, Kotak Bank top gainers
Over FY18-21, Indigo Paints delivered a sales/EBITDA/PAT CAGR of ~22%/68%/70%, driven by its efforts on distribution expansion, the proliferation of tinting machines, brand investments, and an improving product mix through differentiated products. We expect these initiatives to continue in the coming years as well. In addition, the company has taken 18-20% price hikes in recent months (in line with that of the industry) amid sharp commodity inflation, said Motilal Oswal.
Accordingly, the paint maker is expected to clock sales/EBITDA/PAT CAGR of 28%/ 35%/41% over FY21-24E.It further expects it to continue to do so in the coming years as well.
"On account of its strong topline and earnings growth outlook, we believe Indigo Paints deserves higher multiples in line with large peers trading at 55-60x. We initiate coverage with a buy rating, and target of Rs 2,270 (55x FY24E EPS)," the brokerage added.
The company reported a 16.71% rise in Q2 profit at Rs 13.55 crore against Rs 11.61 crore profit in the June quarter of the current fiscal.
Sales grew 25.70% to Rs 196.11 crore against Rs 156.02 crore in the previous quarter.
However, on a year on year basis, net profit fell 28% to Rs 13.55 crore against Rs 18.81 crore profit in Q2 of last fiscal. Sales rose 26.65% to Rs 196.11 crore in Q2 against Rs 154.84 crore in September quarter of last fiscal.