Prefer Asian Paints on declines, says Mayuresh Joshi

Mayuresh Joshi of Angel Broking told CNBC-TV18, "Asian Paints’ numbers were exceptionally good. They did beat our own estimates in terms of both the top-line and bottom-line. Our own estimates was around Rs 250 crore and they have exceeded the kind of expectations that we had on the street. I think lower commodity prices did help the company but the management commentary is a little bit subdued when it comes to Q3-Q4 where they are seeing that the margins are looking at 15.5 percent which they reported in Q2 – might not be sustainable looking at the slow economic growth that we are seeing and especially the sluggish environment in the industrial side of things.”

He further added, “As a statistic, if one looks at the repainting market which dominates the decorative paint business, Asian Paints is basically a market leader. I think around 22 percent as per market study every repainting of the houses across India is done every 15 years. With sluggish economic activity even that might take a little bit of a backburner. Though the results were exceptionally good the arguments that work against Asian Paints more or less would be the valuation argument where valuations are extremely expensive at this point of time.” “The sustainability of this kind of a growth momentum to continue in Q3-Q4 so I would wait for the counter to decline significantly from current levels where the valuations become a bit more attractive and risk reward becomes attractive for investors to invest from structural point of view. But within the paint segment, this company does stand out in front of Berger Paint where in terms of their market leadership position is a dominating position.” “In terms of dealership outlets, they bought almost 30,000-35,000 dealership outlets as compared to a Berger who is the next competitor to Asian Paints at around 15,000-16,000. I would wait for a 7-8-10 percent correction onto this stock before looking at the stock and accumulating from a long-term perspective."