Accumulate Asian Paints; target of Rs 1460: Prabhudas Lilladher

Prabhudas Lilladher's research report on Asian Paints

We increase our FY19 and FY20 EPS by 6.9-6.7% as APNT has posted ~24% volume growth in domestic decorative business, first 20% growth number after 3QFY11. Although sustenance of the same is yet to be tested given benefit of low base and late Diwali this year and GST rate reduction in 3Q. APNT has given a cautiously optimistic outlook as sales growth will remain sensitive to overall demand and elections. Margins in the near term will be a function of USD/INR, crude price volatility, sales mix and stabilization of production in new units at Mysore and Vizag.

Outlook

We estimate CAGR of 14.7% in revenue and 17.9% in Adj. PAT over FY19-21. We value the stock at 45xDec20 EPS of 32.4 and arrive at a target price of 1460 (Earlier Rs1300). Retain Accumulate.