Neutral Asian Paints; target of Rs 3,000: Motilal Oswal

Motilal Oswal recommended accumulate rating on Asian Paints with a target price of Rs 3,000 in its research report dated May 10, 2024.

Broker Research

May 15, 2024 / 12:56 IST

Neutral

26 Aug, 2025 12:21

Volume

Todays L/H

Motilal Oswal's research report on Asian Paints

Asian Paints (APNT) posted 1%/2% YoY decline in consolidated/standalone revenue in 4QFY24, with decorative volume growth at 10% YoY (vs. est. 9%). The value-to-volume gap expanded to 12% in 4Q from 7% in 3QFY24. Revenue growth was hit by price cuts (3.5% in 4Q), and an unfavorable product mix (subdued growth of the premium segment). Benign raw material prices continue to drive GM, which stood at 43.7% in 4Q, the best in the last 12 quarters. APNT’s gross margin will be the key monitorable in FY25/FY26, considering the changing competitive landscape and dwindling raw material price benefits.

Outlook

There are no material changes to our EPS estimates. APNT launched the ‘Neo Bharat Latex’ paint in Jan’24 that penetrated into the unorganized segment with a branded solution, which is smart, affordable, and accessible to consumers. It will address a market size of INR50-55b (management aims to achieve a 30% share in the medium term). With the entry of new players having deep pockets and massive commitments to investments, the overall industry may see a shift in market share and cost structures. These will be the key monitorables for FY25. We remain cautious on both value growth and margin in FY25/FY26. Despite a correction in the stock, the risk of competitive pressure still hovers around its earnings. Consequently, we reiterate our Neutral rating with a TP of INR 3,000 (based on 45x FY26E EPS).

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