Hold Asian Paints; target of Rs 2544: Prabhudas Lilladher

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Asian Paints has a cautiously optimistic outlook on 2H demand and margins, driven by sustained traction in demand across rural and urban India, growing strength of services business, and likely benefits from the VAE facility.
  • The company has planned a capex of about Rs32.5bn for the VAE facility, which is expected to provide 300-500 bps margin expansion in the long term.
  • APNT has taken another 3-5% price hike in November to compensate for higher raw material costs, including anti-dumping duty on TiO2.
  • The management remains confident of achieving Gross/EBITDA margins of 41-43%/18-20% respectively, going forward, even in an inflationary environment.

Thesis Validation Checklist

  • Investors should watch for sustained volume growth, driven by long festive and marriage seasons, and benefits of price hikes.
  • The company's ability to maintain its Gross/EBITDA margins at 41-43%/18-20% respectively will be crucial.
  • The VAE facility's contribution to margin expansion will be a key factor in the long term.
  • Competitive intensity in the market is expected to remain high, with other players following similar pricing trajectories.
  • New product launches, such as the Apcolite new premium satin version, will be important for driving growth.