Indigo Paints: Upcoming Star

Tons of information.Thanks for sharing it Varun


So the results are out and Indigo Paints has scored on all parameters i.e. EBIDTA, Profit, Revenue and Margins. Note that it had higher advertising spends this time and still managed to grow top and bottom lines. It continues to strengthen its position in the Premium Emulsions category (biggest revenue contributor) and has posted very good volume growth. Now my question and confusion is, why is the market not excited with these results? The stock had taken a beating for 12 months now and I was hoping this set of numbers would warrant a cheer from the market but NO ! I have read in some articles that the market did not like the fact that this PAT and margin growth came at the expense of price hikes. But isn’t it a good thing that they were able to pass on the costs? I have been studying and investing in the stock market since 18 months now so my knowledge is quite limited but from all the books, articles, experiences of other investors that I have read about, I did gather that any player who is able to sustain or improve margins during a downturn, is worth his salt. It demonstrates superior product or pricing power or good demand etc. So why is this a bad thing? Also, with the RM costs softening, advertising spends expected to come down, the margins will only improve. So what am I missing here? Thanks

below is my opinion, at first the company offered the IPO price at 1000 bucks and listed in above 2000, which indeed gives an impression about the company. but, if you look at the facts indigo top line is ramp up at 2X speed before listing and this must be the reason market treated well at listing time. However, co is disappointed in the following quarters with witnessing slow and steady state revenue run rate, which is disappointed. And later time though revenue run rate clocked a bit due to other factors it sees a margin pressure. thus, further declined the stock and later time competition with Jsw & Cos entering into paint industry which indeed a very big threat for the player like Indigo as the base is small and other factors like concall commentary is not in sync with numbers, if you happen to listen previous con calls they mention to improve the revenue with atleast and at a min 30%, but on a overall even with 30% runrate increase the current price is justified.

I hope it is possible to clock the runrate at higher base, improve margins and I believe this is very much possible in near quarters with the launch of new factory which is scheduled to begin this year.

1 Like