Asian Paints Ltd. share price target

We now value the stock at 57x FY24E EPS resulting in an upward revision to our TP at Rs 3,510/share (Rs 2,810/share earlier).

Asian Paints Q1FY22 earnings beat estimates, Steller margins Asian Paints consolidated net sales increased 91.11% to Rs 5585.36 crore in Q1FY22 compared to Q1FY20. Sales of Paints segment has gone up 90.37% to Rs 5,464.66 crore (accounting for 97.82% of total sales). Sales of Home Improvement segment rose 133.25% to Rs 121.50 crore (accounting for 2.18% of total sales). Operating profit margin has slumped from 16.57% to 16.36%, leading to 88.65% rise in operating profit to Rs 913.56 crore. Raw material cost as a % of total sales (net of stock adjustments) increased from 47.34% to 54.92%. Purchase of finished goods cost rose from...

Favourable base, pent up demand drive topline The company derives ~98% revenue from the paints business while 2% business comes from the home improvement business (kitchen and bathroom fittings)....

Despite sales being significantly affected in May'21 due to the nationwide lockdown, sales were able to rebound sharply in Jun'21, abetted by significant benefits on account of pent up demand. This led to a significant beat on sales, EBITDA, and PAT v/s our expectations, despite materially higher than expected gross and EBITDA margin pressure. While YoY growth numbers can be misleading due to the sharp sales/EBITDA/PAT decline of 43%/58%/67% witnessed in the base quarter, a 9.4% sales growth over 1QFY20 was impressive given the lockdown...

Consumer stocks have seen sustained re-rating since 2009, resulting in most stocks trading at life time high PE with life time high profit margins. We note that FY21 growth was driven by market share gains on the back of superior supply chain and distribution at expense of unorganized players. Although we believe that structural drivers led by strong rural demand outlook and gains from digitization and supply chain automation are positive, further rerating looks a daunting task. We remain structurally positive on HUL, Britannia, JUBI, TTAN and APNT, however return expectations need to be moderate. We rate D'Mart, NEST and KNPL as top picks in consumption...

Asian paints (APNT), is the market leader in the Indian paint manufacturing industry with a market share of ~53%. Strong top-line growth of 44% YoY in Q4FY21, with 48% volume growth supported by strong demand from Tier 2 to 4...

We build in consolidated revenue CAGR of ~18% in FY21-23E led by 17% and 37% revenue CAGR in paints and home improvement business respectively. For the paint business, we build in volume CAGR of 14% in FY21-23E supported by shortening repainting cycle and increasing...

We revise our rating to BUY (HOLD earlier) given the long term structural growth drivers like ,clear focus on driving volumes and profitability, improved traction in other business segments

Provision for interest rose 16.37% to Rs 29.86 crore. Provision for depreciation rose 9.69% to Rs 213.35 crore. Profit before tax grew 65.47% to Rs 1,150.46 crore. Share of profit/loss was 47.73% higher at Rs 5.85 crore. Provision for tax was expense of Rs 286.42 crore, compared to Rs 218.97 crore. Effective tax rate was 24.77% compared to 31.32%. Minority interest...

Asian Paints (APNT) reported above expected revenue while higher than expected input cost inflation lead to in-line PAT. Overall both decorative and industrial coatings business grew at high double digit volume and value. Decorative coatings business benefited from continued strong demand momentum from tier 2/3/4 markets while demand from tier 1 and metros improved sequentially. In international market; Asia, Middle East and Africa recorded double digit volume growth. Input cost inflation led to sharp contraction in gross margin. However, strict control over cost and operating leverage benefits contributed towards EBITDA margin expansion. We maintain our...