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Bonanza Portfolio
Asian Paints
CMP: ₹807
Target: ₹969
Recently , the stock price of Asian Paints Ltd. (Asian Paints ) corrected nearly 12 per cent from recent high of ₹925 as the company posted lower than expected revenue growth due to low pick -up in demand.
Asian Paints is the industry leader in the decorative paint segment with about 53 per cent market share. Asian Paints recorded revenue CAGR of nearly 1 7 per cent in FY 11 -15 driven by volume CAGR of during the same period amid economic slowdown. In spite of inflationary pressure in FY11-15, gross margins also expanded about 110 bps , indicating its pricing power. Slowing GDP growth and a slowdown in discretionary expenditure took a toll on overall volume growth of the paint industry.
The company has a strong supply chain as has rapidly identified lucrative catchment areas and set-up depots around it to cater the local demands. This has let them achieve the shortest delivery time of 4-5 hrs compared to 24 hrs of other players. It also has a wide product portfolio.
The company is able to deliver 90 -95 per cent of the order placed as inventory availability is high at all times as compared to 60-65 per cent of other players.
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