Reduce Asian Paints; target of Rs 2142: Prabhudas Lilladher

Prabhudas Lilladher's research report on Asian Paints

APNT has given a cautious outlook for FY26 with single digit topline growth and EBIDTA margins in the band of 18-20%. Demand scenario has been tepid and organized decorative demand has seen a decline in FY25. Rural and tier3/4 demand is better than urban India, however normal monsoons benefit of tax cuts and benign inflation. The competitive intensity remains high in decorative paints; however current discounts and the pricing environment are unsustainable for new entrants. 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 4.9% in revenue and 6.4% in PAT over FY25-27. APNT trades at 48.4xFY27 EPS, which looks expensive given the tepid growth scenario. Retain reduce rating with target price of Rs2142 (45xFY27 EPS, 2094 based on DCF earlier).