Neutral Asian Paints; target of Rs 3120: Motilal Oswal

Motilal Oswal's research report on Asian Paints

APNT reported strong volume growth of 10% in 1QFY24 (est. 8%). The management attributed this growth to the strong performance of the economy and premium segments, although the luxury segment lagged behind. Additionally, the company observed an improvement in rural markets, with rural and urban markets coming closer in terms of performance. The increase in gross margin was attributed to the softening of raw material prices, efficient sourcing, and a favorable product mix. As raw material prices stabilize, the gross margin is expected to return to normal levels. The management has given guidance for the EBITDA margin to be in the range of 18-20%. Although sharp input cost reductions could lead to healthy earnings growth, APNT’s valuations are fair at 62.3xFY24E and 54.5xFY25E EPS.

Outlook

We retain our Neutral rating with a TP of INR3,120 (based on 50xFY25E EPS).