Broker's call: Asian Paints

Target: ₹2,774

CMP: ₹2596.75

Asian Paints Q3-FY21 revenues, EBITDA and APAT came ahead of our estimate as pent up and festive demand was higher compared to our expectation.

The company witnessed 33 per cent volume growth during the quarter. We believe that the volume growth in the decorative segment should remain high, especially in rural areas, given better crop production this season.

Further, ongoing government investments in rural infrastructure, and house construction in rural areas should help acceleration. In the long term, we remain optimistic about the unorganised to organised shift in the paint industry. APL, being a leader in the category, is likely to benefit the most from the shift.

Considering improvement in demand, we believe that the growth rate would remain high going ahead as well.

The company is likely to post mid-teens volume growth in the domestic decorative paints industry over a long period. Further, the company continues to expand its categories from paints to overall home decoration segments. In addition to Kitchen business, Asian Paints has expanded its Bath business services to Bangladesh and Nepal during the quarter. The company would double Home Decor store count from 16 to 32 over next couple of years- would be a new growth lever along with Waterproofing.