Accumulate Asian Paints; target of Rs1722: Prabhudas Lilladher

Prabhudas Lilladher's research report on Asian Paints

APNT reported low single digit volume growth as lockdown impacted performance in 4Q. Near term volume pressures are likely to sustain as Metros and Tier1 cities (40-50% of volumes) remain under severe pressure due to Covid 19 impact. APNT has started safe painting campaign and expects labor to return once normalcy is restored. However, slowdown in real estate and guidelines on construction activity will impact sales in near term. Despite near term challenges, we remain positive in the structural growth story due to 1) product portfolio straddling across price points 2) huge scope in entry level paints given deep distribution (2x nearest competitor) and 3) success of new products at 15-20% lower prices.

Outlook

We marginally tweak our estimates given low input costs and lower dividend and capex and estimate 16.5% PAT CAGR over FY20-22. We value the stock at 45xFY22 EPS of 38.7 and arrive at a target price of 1722 (Earlier Rs1687). Retain Accumulate.

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