Motilal Oswal's research report on Asian Paints
Asian Paints (APNT) reported strong volume growth of ~16% in 4QFY23 (est. 6%) and ~14% in FY23. The management also indicated that all the segments, i.e., economy, premium and luxury, grew in double digits, with both urban and rural markets performing well. Improvement in gross margin was led by a softening in raw material prices (deflated ~4% YoY), sourcing efficiencies and a decent product mix. With raw material prices being more or less stable, we expect gross margin to be at normative levels. The management has guided for EBITDA margin in the range of 18-20%.
Outlook
Although sharp input cost reductions could lead to healthy earnings growth, APNT’s valuations are fair at 57.8xFY24E and 50.3xFY25E EPS. We retain our Neutral rating with a TP of INR3,120 (based on 50xFY25E EPS).
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