Asian Paints Q4 Review - Negative Surprise At Margin Level, But Attractive Valuation; Buy: Dolat Capital

Dolat Capital Report

Asian Paints Ltd.’s Q4 FY24 revenue/adjusted profit after tax were in-line with our estimates. The company reported 1.9% value de-growth as a result of price pass on during the quarter and 10% volume growth in the decorative segment. Going ahead, volume growth would be a key driver for revenue growth.

Gross margin expanded by 180 basis points primarily led by softening of raw material prices. Crude oil (1.9% YoY) and TiO2 (3.4%YoY) posted deflation during the quarter.

On four-year basis, Asian Paints reported 19.4/18.1% volume and value compound annual growth rate. We expect double digit volume growth in the long run from-

1. industry growth,

2. strong leadership positioning

3. planned capacity addition over four-five years and

4. ongoing acquisitions.

We downward revise our FY25/26E EPS estimates by 7.8/5.1% at Rs 56.6/63.6 to factor in Q4 performance, less room for price hikes and margin pressures. Upgrade to ‘Buy’ from Accumulate valuing at 52 times FY26E and arrive at target price of Rs 3,305. Attractive valuations at current market price.

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