Hold Asian Paints: target of Rs 2779: Sharekhan

Sharekhan's research report on Asian Paints

Asian Paints Limited’s (APL’s) Q2FY2025 performance was a miss on all fronts with consolidated revenue declining by 5% y-o-y, OPM lower by 480 bps y-o-y to 15.4%; adjusted PAT decreased 34% y-o-y. Decorative paints’ volumes decreased by 0.5%. The management has provided a cautious outlook for Q3, considering a poor Diwali season and pressure from competitive intensity in a weak urban consumer demand. It has moderated the volume growth target to single-digits from low double-digits. Management is targeting to achieve OPM of 18-20%. However, we believe volatility in raw-material prices and competitive intensity might keep a check on margins.

Outlook

The stock trades at 52x/43x/38x its FY2025E/FY2026E/FY2027E EPS, respectively. Bleak earnings growth visibility will keep a toll on valuations. Hence, in view on an unfavourable risk reward, we downgrade it to Hold with a revised PT of Rs. 2,779.