Navratri Special from Religare Broking: Why Asian Paints is a long-term buy this festive season

Navratri is already here, and we know how important and auspicious the next few days are, signifying festivities across India. Religare Broking will share a fresh stock idea for the next seven days for long-term investors:

Day 3: Asian Paints

Target: Rs 3,952


LTP: Rs 3,470

Upside: 14%

Asian Paints is the market leader in India, 3rd largest paint company in Asia and 9th largest paint company globally. It has a strong hold over the decorative segment with a market share of 55% and ~84-85% of its revenue is earned from the decorative segment.

Over the last few years, the company has forayed into the home decor segment including kitchen, bath, wallpapers, furnishing, fabric, decorative lighting, and uPVC doors and windows.

The Indian paints industry size is currently around Rs 55,000 crore and is expected to see double-digit growth of approximately 10-12% CAGR in the next 3-5 years.

The growth will be largely driven by demand for affordable housing and real estate, an increase in rural spending, a reduction in the repainting cycle, and a pickup in automobile sales.

Besides, the upcoming festive season is also expected to pick up strong growth for the paint companies on the back of a healthy demand environment.

Over the years, the company’s continuous efforts of launching new products, focusing on premiumisation, strong brand recall in decorative, and strong distribution network have helped to drive growth.

Going ahead as well, the focus will be on driving double-digit volume growth in the decorative segment, favorable product mix and gaining market share by diversifying in the home decor segment.

Besides, its focus will also be on growing the industrial segment as well as expansion & innovation in international markets which will bode well for growth.

Asian Paints has posted strong financials in the last 5 years wherein its revenue/PAT has grown by 14%/9.6% over FY17-22.

Further, we have estimated its revenue/EBITDA/PAT to grow at 19.9%/22.9%/27.8% CAGR over FY22-24E. From an investment perspective, we have a Buy rating on the stock with a target price of Rs 3,952.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)