Buy Asian Paints; target of Rs 3300: Sharekhan

Sharekhan's research report on Asian Paints

Asian Paints Limited’s (APL) Q3 numbers missed estimates with sales volumes remaining flat on extended monsoon, shorter festive season and a high base of Q3FY2022 due to pile-up of inventory prior to significant price hikes. Raw material cost deflation of 7% helped gross margins expand by 182 bps to 38.6% in Q3. With input prices expected to remain lower, the margins expansion to sustain in Q4. December saw volume growth recovering to double digits. The management expects the momentum to sustain in Q4. It is confident of achieving high single to low double-digit volume growth over the two to three years. (It will also be aided by planned capacity expansion in the coming years).

Outlook

Stock has corrected by 20% from highs and is currently trading at 71x/53x/45x its FY2023E/24E/25E EPS. Any further correction provides good investment opportunity from a long-term perspective. We maintain Buy with revised PT of Rs. 3,300.