Reduce Asian Paints: target of Rs 2200: ICICI Securities

ICICI Securities's research report on Asian Paints

While there will be a favourable base starting from Q4FY25, Asian Paints is likely to post muted growth rates in CY25 considering: (1) The stress in urban markets is likely to continue. It has also resulted in downtrading impacting the profit pool. (2) Competitive intensity will materially increase in H1FY26 as Grasim would have commenced all the plants and largely rolled out the distribution. Considering the recent pricing actions in putty and entry level emulsions, we model Asian Paints to focus on protecting market shares sacrificing margins. (3) Commodity prices are also inching upwards along with INR depreciation. While APNT is able to pass on inflation in normal circumstances, we model APNT to face challenges now given the difficult macro environment. There is also a possibility of cyclical slowdown in the auto sector which may impact industrial coatings.

Outlook

We model Asian Paints to report revenue and PAT CAGR of 4.1% and -6.2%, respectively over FY24-27. Factoring in 9MFY25, we model Asian Paints to post YoY earnings decline in FY25 after a gap of almost 17 years. We maintain REDUCE with DCF-based revised TP of INR 2,200 (implied target P/E of 48x FY27E).