Motilal Oswal's research report on Asian Paints
A confluence of positive factors, including (a) a very strong festive season; (b) pent-up demand; (c) recovery in urban, particularly metro demand; (d) recovery in real estate demand, and (e) low material costs for the quarter led to a strong beat on our forecasts. n The company reported its highest ever sales/EBITDA/PAT for any quarter in 3QFY21. While the outlook on demand remains healthy, the extraordinary confluence of positives mentioned above, especially festive season and pent-up demand, may not sustain going forward. n Material cost inflation has also been sharp since December, which means that current all-time high gross and EBITDA margins are unlikely to sustain beyond FY21, especially in a highly competitive industry such as Paints. Valuations are rich at 67.8x FY22E and 58.5x FY23E EPS. Maintain Neutral.
Outlook
APNT has creditably posted much faster recovery than most peers, which is even more impressive considering the highly discretionary nature of the business. This should ensure premium valuations
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