Asian Paints Ltd. share price target

Healthy cash flow stocks to buy in Covid19 correction

Our interaction with managements and dealers indicates significant prebuying activity of consumer goods during January-February 2020 on fears of supply related issues from China. While companies have secured supplies to avoid any disturbance in sales in Q4FY20, demand was negatively impacted in March 2020 owing to holiday and post that lockdown across countries. We also believe a late recovery in demand for consumer goods will also impact Q1FY21 performance due to 1) shortage of workers (due to heavy migration), 2) shift in focus on essential goods compared to discretionary products and 3) streamlining of supply chain....

Our interaction with managements and dealers indicates significant prebuying activity of consumer goods during January-February 2020 on fears of supply related issues from China. While companies have secured supplies to avoid any disturbance in sales in Q4FY20, demand was negatively impacted in March 2020 owing to holiday and post that lockdown across countries. We also believe a late recovery in demand for consumer goods will also impact Q1FY21 performance due to 1) shortage of workers (due to heavy migration), 2) shift in focus on essential goods compared to discretionary products and 3) streamlining of supply chain....

APNT delivered a weak performance for second quarter in a row especially on revenue front as it report a 3% YoY growth in revenues despite ~10% volume growth, mainly due to mix deterioration (higher focus on economy segment products and weak growth in premium products).

December 2019 compared to corresponding previous year period. The company operating margins rose 90 bps to 21.9%. As a result operating profit growth rose 8% to Rs 1189.39 crore. Cost of raw material consumed as a percentage of net sales (net of stock adjustment) fell 560 bps to 45.6% while purchase of stock in trade rose 140 bps to 8.3%, employee benefit expense rose 70 bps to 6.8% and other expense increased 140 bps to 15.8%....

Asian Paints Limited is an Indian multinational paint company headquartered in Mumbai, Maharashtra. The company is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related to home decor, bath fittings and providing...

Asian paints (APNT), is the market leader in the Indian paint manufacturing industry with a market share of ~53%. Q3FY20 revenue grew by 3% YoY (below estimate) due to poor realization despite double digit volume (~11% YoY). Higher volume of economy products, price cut of 0.25% and slowdown in economy impacted the growth. EBITDA margin improved by 96bps YoY to 21.9% due to benign material cost and lower other expenses....

Change in product mix weighs on value growth While the decorative segment volume growth remained intact in 9MFY20, the change in product mix coupled with slight price cut on select product categories resulting in a decline in realisation of the company. The consistent growth in the decorative segment was largely due to 1) strong demand from tier II, tier III cities and rural India, 2) market share gain in bottom of the pyramid products and 3) launch of new products in the economy range. We believe paint demand will remain strong (~13% CAGR...

22 January 2020 APNTs ~-8% realization decline (on a base that had an already weak mix in 3QFY19) does not augur well for its sales growth beyond FY20, especially given the uncertain economic revival. While 4QFY20 should continue seeing YoY margin gains, there is uncertainty on further commodity price reduction in FY21/FY22, thereby tempering margin growth expectations. This means that EPS growth is likely to be in line with top line. On account of lower FY20 capex assumption and margin beat in 3QFY20, we have upgraded FY20/FY21 EPS estimates at 2%/3%; our FY22 forecast remains unchanged. net sales grew 3% YoY to INR54.2b (slightly lower than est. INR54.5b), despite volume beat of ~11% (v/s est. Note that 3QFY19 saw 23.5% sales growth. Despite significant mix deterioration, gross margins were up 190bp YoY to 43%. However, higher operational expenses mean that EBITDA margin expanded only 100bp YoY to 21.