Hold Asian Paints; target of Rs 2000: Prabhudas Lilladher

Prabhudas Lilladher recommended Hold rating on Asian Paints with a target price of Rs 2000 in its research report dated October 22, 2020.

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October 23, 2020 / 14:24 IST

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Asian Paints

We are cutting FY22 and F23 EPS 6.6% and 5% and rating to Hold despite stellar performance in 2Q mainly due to 1) standalone Gross margins at 45.4% are down 90bps QoQ and have peaked out 2) Strong volume recovery post 1QFY21 means that the base for FY22 and FY23 will be higher than was earlier anticipated 3) while current margin expansion is 470bps, it has come over a low base (18.9%) and leaves limited room for expansion in FY22 and FY23. Foray into lighting, furnishings and furniture is expected to provide scale to home improvement business, although it will drag margins in near term. While we remain constructive about the structural growth opportunity in decorative paints and huge advantage APNT has got in distribution, brand and systems, the PAT growth in FY22 and FY23 is likely to be lower than earlier expectations. We estimate a CAGR of 15.9% sales, 16.7% EBIDTA and 22% in PAT over FY21-23, which factors in most positives.

Outlook

We assign Hold rating with a target price of Rs2000 @46.5xFY23 EPS (Rs2032 earlier@45xFY23 EPS). We believe returns will be back ended given ~25% rally in stock price in last 3 months.

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