Sharekhan’s research report on Asian Paints
Asian Paints Ltd’s (APL’s) decorative paints’ sales volumes clocked a two-year CAGR of 22% in Q2 (and 17.5% in H1FY22). Buoyant urban demand and gradual pick-up in rural demand would help maintain growth momentum in H2. APL has cumulatively hiked prices by ~16% and is planning to take another price increase of 5%, which will address raw material inflation (that stood at 20% in Q2FY2022). If raw material prices remain stable at current level, OPM would normalise by Q4FY2022. New businesses (including kitchen and bath) are scaling up well with strong demand in the home improvement sector. New ventures are expected to post good improvement in profits ahead.
We maintain a Buy on the stock with an unchanged price target of Rs. 3550. Stock has corrected by ~13% from its high and is trading at 68x/54x its FY2023/24E EPS.
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