Buy Asian Paints; target of Rs 3675: Prabhudas Lilladher

Prabhudas Lilladher's research report on Asian Paints

We are changing FY22/FY23/FY24 EPS by -23.9%/-7.3%/2% on account of unprecedented input cost pressures, heightened volume focus in decorative paints & a move from “share of surface” to “share of Space” in Homes. We continue to remain positive on long term growth drivers led by 1) Market share gains in decorative paints from both organized & unorganized players due to strong focus on economy segment 2) Increased distribution with addition of 40k+ retail points. 3) Innovations & focus on high growth waterproofing/ construction aids segment 4) Ramp up in Kitchen & Bath business (PBT breakeven in 2Q) and 5) foray into designer tiles & home décor business enabling APNT to emerge as a complete home solution company.

Outlook 

We maintain BUY with a TP of Rs 3675 (Rs 3511 earlier), however expect back ended returns given near term cost pressures and rich valuations of 66.6x/52x FY23/24 EPS..