Reduce Asian Paints; target of Rs 3000: ICICI Securities

ICICI Securities recommended reduce rating on Asian Paints with a target price of Rs 3000 in its research report dated July 26, 2023.

Broker Research

July 29, 2023 / 21:29 IST

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ICICI Securities research report on Asian Paints

While Q1FY24 PAT growth of 48.9% YoY was higher than consensus estimates, the results were qualitatively weaker in our view as (1) In-spite of delay in monsoon and stronger Apr’23, the revenue growth was muted at 6.7% YoY, (2) volume growth was 330bps higher than revenue growth indicating mix deterioration and higher volumes of low value products such as putty and (3) B2B portfolio (Industrial paints and Projects) has reported double digit revenue growth indicating weaker growth of consumer portfolio. APNT is likely to report EBITDA margin (Q1FY24 standalone: 24.6%) higher than its target range of 18-20% in FY24 due to lower RM prices. However, we believe the margin expansion is likely to be short lived and is likely to correct with increase in competitive intensity from Q4FY24. Maintain REDUCE.

Outlook

We model Asian Paints to report revenue and PAT CAGR of 9.8% and 14%, respectively. We believe the valuations (P/E of 60.2x FY25E) are stretched considering the increase in competitive pressure. Our DCF based revised target price is Rs3,000. Maintain REDUCE.

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