Buy Asian Paints; target of Rs 3385: Sharekhan

Sharekhan's research report on Asian Paints

Prudent capacity expansion plan, sustained innovation, backward integration and improving customer experience will help APL navigate through the tough times of heightened competition in the near term. OPM to remain flat over the next two years. Contribution from new launches came in at 11% in FY2024 (it added 24/16 products in decorative/industrial paints in FY2024). In-house manufacturing capacity is expected to increase to 26.7 lakh KL/annum from 18.5 lakh KL/annum at FY2024-end. Cash flow generation stayed strong with FCF of ~Rs. 2,400 crore. Working capital cycle improved by 10 days to 42 days in FY2024.

Outlook

We upgrade Asian Paints Ltd (APL) from Hold to Buy with a revised PT of Rs. 3,385. Stock trades at 51x/45x its FY2025E/26E EPS, which is a discount to its historical average, making risk reward favourable.

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