Accumulate Asian Paints; target of Rs 1278: Prabhudas Lilladher

Prabhudas Lilladher's research report on Asian Paints

APNT has given cautiously optimistic outlook on demand as economy post GST implementation has started stabilising. Demand scenario looks encouraging as low penetration in small towns/rural India and GOI focus on affordable housing boosts demand for decorative paints in coming years. Near term margin pressure looks likely as input costs linked to crude and Tio2 have firmed up. We expect APNT to outperform Kansai Nerolac (30% outperformance over APNT in 12 months) as it has just 5% contribution from Auto and Industrial paints (lower pricing power) than ~40% for Kansai.

Outlook
We expect premium valuations to sustain and retain “Accumulate” with target price of Rs1,278 (41xDec18 EPS).

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