HDFC Securities is positive on Sirca Paints India and sees up to 20 per cent rally in the SME player in the next six to nine months. The domestic brokerage firm is bullish on the company’s fundamentals, new product launches, growth prospects and niche segment of operations.
Sirca Paints India (Sirca) is a leading high-end wood coatings company, engaged in the manufacturing, sales and exports of wood coatings and other decorative paints under the brand ‘Sirca’. The company has an exclusive tie-up with Sirca SPA (Italy) for the manufacturing and distribution of Sirca products in India, Nepal, Bangladesh and Sri Lanka.
A strong foundation backed by a robust business model, layered with a vast potential market positions Sirca well for delivering the next leg of value, said HDFC Securities.
“We believe the company is prepared to make the most of the opportunities that lie ahead, from strengthening infrastructure and distribution network to creating brand awareness to investing in people and expanding its value propositions, Sirca has what it takes to create long and lasting value for the investors, in our view,” it said.
Sirca Paints India was listed on NSE’s SME platform in June 2018 at around Rs 102. However, the company had raised Rs 77.92 crore from initial public offering (IPO) by selling its shares for Rs 160 apiece. However, the company is currently commanding a market capitalization of more than Rs 1,710 crore.
Shares of Sirca Paints have rallied 505 per cent in about five years from its listing price of around Rs 102 to Rs 613 on Monday, March 6, 2023. The stock has gained about 60 per cent in the last one year, whereas it has posted double-digit gains in the last six months.
Incorporated in 2017, the Delhi-based Sirca Paints India has become one of the leaders in northern India for wood coatings. Starting with a fairly simple business model of importing PU products, repacking and selling them through its distribution network, said the analysts.
The company has launched melamine, NC products, and economical PU products under the Unico brand for which it has set up an in-house manufacturing unit. Besides this, it has strategically forayed into the wall paint segment, said HDFC Securities.
“We expect the company to report strong growth across categories over FY22-25E on the back of driven by rapid distribution expansion, hiring of experienced industry professionals leading to improved efficiencies and fast track growth, a sharp focus on upgrading the IT, ERP, and digital systems and operating leverage with improving efficiencies,” it said.
The brokerage is optimistic about the long-term prospects of the company given a solid product portfolio, strong track record and multi-billion-dollar opportunity in the Indian paints industry. “We think the base case fair value of the stock is Rs 671 and the bull case fair value is Rs 737.”
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