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Street remains bullish on Asian Paints’ growth outlook

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Brokerages have retained their bullish view on Asian Paints following its December quarter result, which saw the company surprising the Street on the volume growth front which grew in double digits.

Target prices have been revised up by 7-34 per cent, with many brokerages rolling forward valuations. Asian Paints on Tuesday posted a 14.6 per cent increase in consolidated profit from the year ago level at Rs 635.6 crore.

Consolidated revenue increased 24 per cent to Rs 5,293.99 crore. Shares of Asian Paints ended down 0.7 per cent at Rs 1,397.10 after gaining as much as 1.7 per cent intraday.

The stock has gained 22.7 per cent in the last three months. Macquarie, which revised up target price the most among brokerages, also upgraded the stock to 'outperform' from 'neutral'. Citigroup, Credit Suisse, Jefferies, Kotak Institutional Equities, and Morgan Stanley revised target price higher by 7-25 per cent.

CLSA retained the ‘outperform’ rating with a target price of Rs 1,565.

Both Jefferies and HSBC retained ‘buy’ ratings and target price at Rs 1,600. “Asian Paints reported one of the strongest quarters in eight years with volume growth of 20 per cent YoY, much above our and consensus estimate of 14 per cent," said Deutsche Bank. “Although APNT’s (Asian Paints) robust volume growth of 20 per cent in 3QFY19 was largely driven by festive sales, its four-quarter moving average volume increased to 13 per cent YoY, much above the industry growth of 10 per cent YoY,” the bank added. Morgan Stanley said price hikes and the benign input cost environment increase the visibility of over 20 per cent earnings growth for FY20-FY21. Some brokerages such as Citi, Kotak Institutional and Credit Suisse have increased target prices but retained ‘neutral’ or ‘reduce’ rating.

“We believe medium-term upsides are well reflected in stock valuations, particularly post the run-up in the last 3 months," said Citigroup.




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