Buy Asian Paints; target of Rs 3416: Geojit

Geojit's research report on Asian Paints

Asian Paints (APNT), is engaged in the business of manufacturing, selling and distribution of paints and related product for home décor. APNT is the market leader in the Indian paint manufacturing industry. APNT reported a below expected result as inferior product mix and an extended monsoon impacted the top-line growth, which grew by 19% YoY in Q2FY23. Volume in the decorative business grew by 10% YoY while value growth was 20% YoY. EBITDA margin improved by 177bps YoY to 14.5%, which is below the expectation as the recent steep price hike has impacted the product mix. The demand was dominated by economy emulsion & undercoats during the quarter. The company announced a capex plan of Rs. 6,750cr over the next three years for capacity expansion and backward integration.

Outlook

The company’s foray into the white cement business and in-house capacity expansion by 30% to 22.7 lakh KL per annum to support profitability in the long term. We therefore, reiterate Buy rating on the stock with a TP to Rs. 3,416, based on a P/E of 60x on FY24E EPS.

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