Target: ₹3,200CMP: ₹3,155.80 Q3 performance was marginally ahead of our expectation, driven by higher volumes and sequential improvement in margins. Sales grew 26 per cent to ₹8,300 crore, 2 per cent ahead of estimates, with 18 per cent growth in domestic decorative volume. Margins declined by 830bps y-o-y but improved by 540bps qoq on pricing actions and operating leverage. Management highlighted strong trends in tier-1 & 2 towns and a strong festive season. Jan’22 has been soft due to restrictions but management expects demand to bounce back. Faster dealer additions and strong traction in projects/décor businesses boost the outlook. Margins have improved sequentially and with full benefit of price hikes effected in Q3, management expects Q4 margins to see further improvement. Though input prices are higher, an additional 7-8 per cent price flow-through should further drive up margins q-o-q. We raise estimates by nearly 8 per cent, factoring in higher volume and an improved margin outlook. Growth outlook remains robust but valuations at 57x FY24 EPS restrict upside. Retain Hold with a revised target price of ₹3,200 based on 55x Mar24 EPS (vs. Dec’23E EPS earlier).

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