Earnings broadly in line
Asian Paints' top line grew 1.3% YoY (three-year CAGR: 16.8%); fell short of expectations (var: -3%). The decorative business was largely flat (0/1% volume/value growth YoY in Q3FY23 due to (1) an extended monsoon and shortened Diwali season and (2) a high volume base impacting growth. The worst of the margin pressure seems to be over as Q3 marked the end of a six-quarter upward RM spiral. Consequently, GM/EBITDAM expanded ~180/60bps YoY. RM moderation is likely to continue in Q4. Note: price hikes (+24%) are yet to catch up with RM inflation (+29%) since Q1FY22. APNT is embarking on a significant investment phase (INR87.5bn over three years) towards (1) capacity enhancement, (2) backward integration, and (3) acquisitions. While beneficial in the long run, it will certainly be a drain on FCFF and returns profile in the short to medium term. We largely maintain our FY24/25 EPS estimates (-1/-2%) and our REDUCE rating with a DCFbased TP of INR 2,680/sh (earlier: INR2,700/sh), implying 50x Dec-24 P/E.
Shares of Asian Paints Limited was last trading in BSE at Rs. 2788.10 as compared to the previous close of Rs. 2868.05. The total number of shares traded during the day was 189090 in over 39121 trades.
The stock hit an intraday high of Rs. 2850.10 and intraday low of 2782.50. The net turnover during the day was Rs. 530353964.00.