Reduce Asian Paints; target of Rs 820: Dolat Capital

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26 Aug, 2025 12:21

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Dolat Capital's research report on Asian Paints
Q1FY16 volume growth was on low double digit at around 10-11% (11% growth in Q1FY15) ahead of our and street expectation. This growth has been on back of a sustained muted growth in the last two quarter.

Volume growth was on back of a strong volume growth in lower end paints categories. As a part of its strategy, the company has taken a price reduction in the lower end paints in March 2015 and increased its focus on these segment. We believe this could be to take on the players (unorganised and organised) which has a strong presence in this segment. 

A double digit volume growth indicates a decline in realization of 4-5% (2% due price reduction and 2-3% due to mix change).

North and East continues to do better when compared to South and West.

Industrial business reported net sales growth of 13% this was driven by good growth in Auto (refinish and general industrial).

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The company plans to setting up additional capacity in AP and Karnataka market. For FY16, the capex is expected to be Rs 7bn.

Valuations:"We believe Asian Paint is taking advantage of the benign RM cost scenario by reducing prices of lower end products as it already has a strong presence in the premium segment. We have revised our estimate to factor in a better operating performance. We estimate a 14% CAGR in revenue and 24% CAGR in earnings during FY15-17E. We believe, the P/E multiples remain high due to margin expansion. At CMP of Rs 815 stock trades at 43x FY16E EPS of Rs 18.9 and 36x FY17E EPS of Rs 22.7. We recommend Reduce with a price target of Rs 820", says Dolat Capital research report.

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