Neutral Asian Paints; target of Rs 3150: Motilal Oswal

Motilal Oswal's research report on Asian Paints

Asian Paints (APNT) posted 2%/3% YoY decline in consolidated/standalone revenue in 1QFY25. Decorative volume grew 7% YoY (est. 12%). The value vs. volume gap was in the range of 5-6% vs. ~12% in 4Q. Revenue growth was affected by price cuts in the last quarter (~3.5% in 4Q), an unfavorable product mix, general elections and heat waves. Raw material prices rose 1.8% in 1Q and are expected to rise ~1.5% in 2Q. To offset these costs, APNT implemented a ~1% price hike in Jul’24 and may hike again in the upcoming quarter. Gross margin contracted by 40bp to 42.5% in 1Q. Monitoring gross margin in FY25/FY26 will be crucial due to the changing competitive landscape, rising raw material prices and ongoing supply chain challenges.

Outlook

We remain cautious for both value growth and margin in FY25/FY26. Despite a correction in the stock, competitive pressure still hovers around earnings. We reiterate our Neutral rating with a TP of INR3,150 (based on 45x Jun’26E EPS).