The Current Market Price (CMP) of Asian Paints is Rs. 3116. Sharekhan has estimated a Target Price for the stock at Rs. 3689. The stock is expected to offer an 18% upside, in 1 year.
|Current Market Price (CMP)||Rs. 3116|
|Target Price||Rs. 3689|
|1 year return||18.00%|
Asian Paints Limited’s (APL) revenue grew by 40% in 9MFY2022 with volume growth at 40% in the decorative paints business (two-year CAGR of 20%). OPM stood almost flat at 24.5%. APL targets the home décor business to contribute ~10% to India’s decorative business in the next 2-3 years. In addition to that, APL has acquired a 49% stake in White Teak (present in decorative lighting products & fans) for Rs. 180 crore and a 51% stake in Weatherseal (present in uPVC windows and doors) for Rs. 19 crore, in the recent period. The company will also be acquiring a 100% stake in both companies by FY2026 in a phased manner.
Sharekhan stated, “APL is focusing on transforming itself from a paint company to a complete home décor company in the long run. A strategic stake buy in White Teak and Weatherseal is unlikely to add significantly to the company’s earnings. It is open to more such inorganic and organic acquisitions, which will help in widening its home décor portfolio. Scale-up in the company’s operations and revenue would help in adding to the company’s earnings in the medium to long term. Near-term headwinds of volatility in crude prices and a slowdown in demand environment will keep toll valuations in the near term.”
About the company
APL is the largest paint company in India with a market leadership of over 50 years and stands among the top 10 paint companies in the world. The company has 26 paint manufacturing plants in 15 countries, serving customers in over 60 countries globally. The company offers paints – decorative and industrial, wall coverings, and waterproofing along with kitchen and bath fittings, adhesives, and services. Deco India, including decorative paints, waterproofing, wall coverings, and adhesives, constitutes almost 84% of the company’s total revenue. The international business contributes ~12% to the total revenue mainly dominated by Nepal, Sri Lanka, and Bahrain.
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