Asian Paints Q1 Results Review - Sales, Gross Margin Inline; Ebitda Surprises Positively: Nirmal Bang

Nirmal Bang Report

Key Points

• While Asian Paints Ltd.’s Q1 FY24 sales and gross margin were in line with our expectations, Ebitda margin of 23.1% (estimate: 19%) was a big surprise given management guidance of 18-20% for FY24.

• However, negative realisation/mix trend seen in Q4 FY23 continued in Q1 FY24 and we believe will continue for a few more quarters.

• While the Asian Paints' management maintained its FY24 Ebitda margin guidance due to some recent inflation in crude-related costs, we believe they are being conservative and are likely to comfortably exceed the guidance.

• Changes to our forecasts have resulted in 12.9%/2.5% increase in FY24E/FY25E earnings per share. Any significant increase in competitive intensity towards the end of FY24 could put our FY25 margins at risk.

• Rich valuations of 54 times FY25E EPS lead us to maintain 'Accumulate' with a target price of Rs 3,250 valuing the stock at 50 times June 2025E EPS.

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