YES Securities' research report on Asian Paints
Asian Paints (APNT) once again delivered a strong performance in a challenging environment with 8% volume growth on base of 48% volume growth despite a soft performance in January. Value growth stood at 21%; higher value growth was on account of price increases partially offset by deterioration in product mix. Growth was uniform for the company with strongest growth in West and East markets. The company is witnessing strong double‐digit growth in Tier 1 and 2 cities led by luxury and premium range, while tier 3 and 4 markets delivering growth in economy range. APNT has been aggressive in launching new products which now contribute 14% to the revenue. It is also aggressively expanding its home décor foray with extended offering across the product categories like kitchen, bath, sanitary ware, lighting, tiles, flooring, furniture, furnishings, doors and windows. APNT is targeting to nearly double its Beautiful Home stores to 70 in FY23. On international front, company saw growth from Asia followed by Middle east while Africa, Ethiopia and Srilanka are seeing impact of currency devaluation. Company is also aggressively expanding its distribution touch points and has added 15,000 retail points in FY22. Considering strong demand momentum despite sharp price hikes, under penetration of paints and opportunities in new segments and services, we feel demand for paints is expected to remain robust in medium term and APNT is in a sweet spot to capture a major chunk of incremental demand.Also, its foray into home décorto broaden its product and service offerings to a large consumer base is expected to make Asian a go to brand in the broader home improvement space. Its pricing power, distribution prowess and balance sheet strength should enable it to ward of any competition that comes in it way. Considering the above, we continue to remain upbeat on the stock and feel premium valuations are justified.
We expect FY22‐24E Revenue/EBITDA/PAT CAGR of 18%/34%/39% respectively and maintain our BUY rating with TP of Rs3,708 valuing it at 60x FY24 EPS.
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