Target: ₹3,416

CMP: ₹3,157.05 

Asian Paints (APNT) is engaged in the business of manufacturing, selling and distribution of paints and related product for home décor. APNT is the market leader in the Indian paint manufacturing industry.

APNT reported a below-expected result as inferior product mix and an extended monsoon impacted the top-line growth, which grew by 19 per cent year on year in Q2-FY23. Volume in the decorative business grew 10 per cent y-o-y, while value growth was 20 per cent. The kitchen and bath fitting business reported ₹100-crore-plus revenue for the last four to five quarters, bottom line was impacted due to inflationary pressure.

The inflationary pressure and recent steep price hikes have impacted the demand for premium products.

EBITDA margin improved 177 bps to 14.5 per cent, which is below the expectation as the recent steep price hike has impacted the product mix. The demand was dominated by economy emulsion and undercoats during the quarter.

The company announced a capex plan of ₹6,750 crore over the next three years; 50 per cent to be spent on brownfield capacity expansion and 38 per cent on backward integration. The company’s foray into the white cement business and in-house capacity expansion by 30 per cent to 22.7 lakh KL per annum is expected to support profitability in the long term.

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