Reduce Asian Paints; target of Rs 1800: HDFC Securities

HDFC Securities' research report on Asian Paints

Asian Paints (52/64% revenue/PAT share) with 2.5-7x active dealers than the next three paint companies remains de-facto king in distribution/supply chain of paints in India. Coupled with better price laddering of products across categories/price points, this has ensured its unhindered dominance over decades. Promising optionality in waterproofing/other adjacent categories (we build in 40-50bp incremental growth from waterproofing) could surprise on the upside. We build in Sales/EBITDA/PAT CAGR of 8/9/10% over FY20-23E. Alas! all pluses seem priced-in at 55x Sept-22 P/E.

Outlook

We initiate coverage with a Reduce Reco and DCF-based TP of Rs. 1,800/sh (implying 50x Sep-22 P/E).