One of the main issues with indigo has been over valuations. Currently at just under 5000 crores mcap I think we can finally say it’s cooled off to reasonable valuations now. Based on the recent concall and presentations it looks like Q4 will be even better than q3 and January has already seen good growth. Q3 would’ve been better but the entire paints industry struggled due to the late monsoon end disrupting October a bit. So we are at around 4 to 5 x sales currently which makes it one of the cheaper companies in the paints sector. Management is adamant they can grow at 1.5x to 2x the leaders rate. Overall industry should grow at 12 to 13 percent per year according to them. Value growth and volume growth should be around equal now with price hikes now behind us. Raw material cooling means trade discounts cooling too. They say ebidta margins should stay steady and similar. New products coming on line in q1 and once capacity on line it’s enough to grow for 2 to 3 years(I may have misunderstood this part) and no debt. Management is very open and give out a lot of information. So overall it’s currently at fair valuations for a paints company(which is still expensive!)
The question left is Does the paints industry deserve such high valuations overall. I’m not sure it does and there in lies the problem. Historical valuations doesn’t equal future evaluations. That being said This seems like a good way to play the paints space if one has belief in this sector since even the loss making Shalimar is at 3x sales and Indigo deserves a higher valuation than Shalimar.
@Prashantit2009
The latest concall mentioned ad spends (I can’t remember top of my head). Also mentions Kerala as one of the major states and how it’s performing more than the average Vs other states. No exact split though. I’d recommend reading the transcript though it may not satisfy your questions properly
Disc : Not invested. Not a sebi advisor. Just tracking the paints sector and Indigo for now
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