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Centrum Broking
Asian Paints (Buy)
Target: ₹2,393
CMP: ₹2,070
As Asian Paints Q2-FY21 print surpass our expectations; consol. revenue/ EBITDA/ PAT grew 5.9 per cent/32.5 per cent/1.0 per cent respectively driven by robust volume growth at 11 per cent. Management stated strong recovery across segments and improving demand conditions in tier2/3/4 towns. Gross margin expanded 165 bps driven by benign input costs, healthy product mix and continued work on driving sourcing/formulation efficiency. Whilst EBITDA grew 32.5 per cent, reporting EBITDA margin at 23.6 per cent (after 30 quarters.).
We reckon return of normalcy in metros and festive season ahead coupled with rural thrust, could result in continued growth ahead. Further, the management narrated its plan to strengthen Home Décor play with introduction of offerings in lightings/furnishings and furniture.
We believe Asian Paints to emerge as complete home solution company based on core strategy: drive volumes through upgrade to emulsions; expand rural footprint; gain volume market share; and market development for waterproofing business.
Given this we believe it is a structural growth story capturing demand across improvement.
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