Top Stock to Buy with Anil Singhvi – Shalimar Paints, Sirca Paints and Kamdhenu Ltd: The Initial Public Offering (IPO) of Indigo Paints is opening on Wednesday which will likely trigger a rerating in the paints sector, Zee Business Managing Editor Anil Singhvi opines. In today’s edition of Budget 2021 Stock Picks, Senior Research Analyst Varun Dubey brings a detailed report of this sector. There are three stocks that may suit your budget and will likely bring a triple bonanza.

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The Market Guru said that the Zee Business Research Team has found out how the valuations of Indigo Paints and other small paint companies' match. The research leaves out top companies including Asian Paints, Berger, Kansai Nerloac and AkzoNobel.

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The three paint companies are Shalimar Paints, Sirca Paints and Kamdhenu Ltd. Though people don't relate much with the paint business of Kamdhenu, around 25 per cent of its income comes from the paint business, Dubey said.

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All the companies have been judged on various financial parameters. The revenue CAGR of Indigo Paints is around 39 per cent while that of Sirca is over 21 per cent, which is by all means quite significant, the senior analyst said. As for Kamdhenu it is around 10 per cent.

The trailing 12-months Price-to-book value for Indigo is around 31 per cent but for Kamdhenu it is only 2, Shalimar at around 2.4.

In terms of market cap-to-sales, Indigo trades around 12, Kamdhenu is just around 0.4 while Shalimar is around 1.8.

The profit margins for Indigo are 7.7%, Sirca has margins around 18 per cent, which is the best in the industry.

Moreover, there could be rerating in Kamdhenu as the company is planning a demerger.

The profit CAGR of Sirca is around 75 per cent over the last 7 years, though the company was listed in 2018. The foreign promoter holding is around 33 per cent.

Shalimar Paints is a Jindal Group company which has said that it will take the sales up to Rs 1000 cr over the next 3 years. It is currently around Rs 350 cr. In terms of valuations, al the three companies are available at attractive prices in comparison to Indigo Paints, Dubey said.

Anil Singhvi’s View on Shalimar Paints, Sirca Paints and Kamdhenu Ltd

The Market Guru said that Shalimar Paints has not seen growth over the last 10 years since it has not undertaken any expansion. It is expected to see growth now. The sales will get doubled in the next 2-3 years, he opined. There is demand in this sector.

The promoters of Sirca are also very experienced. The profit margins are excellent. As for Kamdhenu, it is more know for its steel business, but its paint business is quite big. Its demerger will unlock the value of its paint business, Singhvi said.

The investors should keep an eye on all these companies till the listing of Indigo. These companies will likely see a rerating.