Target: ₹3,159
CMP: ₹3,165.60
We cut FY25/26 EPS estimates by 1.2/1.4 per cent given little scope to improve margins (all time high levels ex of covid year) on expected increase in competitive activity (Grasim’s entry) despite sustained double digit volume growth expectations. Q3 volumes are up 12 per cent owing to improved sentiments in festive & wedding season along with significant traction in luxury/economic range.
Domestic outlook remains positive across decorative, Auto and industrial segments while IBD has uncertainty due to Geopolitical issues. Home décor is showing noticeable signs of improvement segments while ‘Beautiful Homes’ stores & network continues to scale up.
- Also read: Broker’s call: IndusInd Bank (Buy)
Asian Paint’s structural moat driven by market share gains in decorative paints, sustained increase in distribution (addition of 2k retail touch points in Q3-24 to 160k), high growth in waterproofing/wood finishes/projects business and scalability plans in home décor from 4-5 per cent to 8-10 per cent of sales by FY26 remains intact.
We expect stunted growth in medium term given that near peak EBIDTA margins; likelihood of price cuts (1.3 per cent in Q3-24); Q4-24 entry of Grasim in decorative paints.