Reduce Asian Paints; target of Rs 2123: Prabhudas Lilladher

Prabhudas Lilladher's research report on Asian Paints

We cut FY25/FY26/FY27 EPS by 0.4%/3.6%/4.6% given 24% decline in 9mFY25 PAT and tepid outlook in medium term. We believe APNT is facing pressures on multiple fronts led by 1) tepid urban demand due to high inflation 2) consumer downtrading as mass and economy segments are growing faster and 3) rising competitive intensity in decorative paints post entry of Birla Opus. While we expect demand scenario to improve post 1Q/2Q26 aided by benefits of recently announced tax cuts by GOI, the impact of competitive intensity is here to stay. We believe the acquisition of decorative business of AKZO Nobel by a strong player will further add to competition.

Outlook

We estimate a CAGR of 5.8% in revenue and 3.5% in PAT over FY25-27. APNT trades at 50x FY27 EPS, which looks expensive given the tepid growth scenario. Retain reduce rating with target price of Rs2123 (DCF Based, Rs2230 earlier).

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