Asian Paints, Angel One Q1 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Asian Paints - Weak print; heatwave, general elections impact demand

Asian Paints Ltd.’s revenue declined 2.3% YoY in Q1 to Rs 89.7 billion (our estimate: Rs 91.5 billion). Decorative clocked 7/-3% volume/value growth in Q1 and industrial business grew 5.8% YoY in Q1. Distemper, Neo Bharat (new product) and premium waterproofing performed well while economy emulsions struggled.

Green shoots are visible in rural demand. June-24 witnessed demand recovery. Gross margin contracted 40 bps YoY to 42.5% (our estimate: 43.6%) courtesy raw material inflation (1.8% in Q1) coupled with supply chain challenges. Ebitdam contracted 422 bps to 18.9% (our estimate:21.3%) courtesy higher advertising and promotion spending (to defend share) and higher employee expenses.

We’ve cut our FY25/26 EPS estimates by 3/2% to account for lower margins as higher supply (led by Birla Opus’ entry plus capacity additions across the sector) meets weak-to-average demand in FY25/26.

Maintain Reduce with a DCF-based target price of Rs 2,750/share; implying 47 times June-26 price/earning.

Angel One - Changing the game rules; no more easy money

Angel One Ltd. clocked a 4% QoQ growth in its topline and a 14% QoQ decline in adjusted PAT, driven by gains in overall equity market share, offset by IPL spends of Rs 1.15 billion. As highlighted in our note earlier this month, the SEBI directed exchanges and market infrastructure institutions to discontinue the practice of charging slab-wise fee structures linked to the turnover and levy uniform transaction charges instead.

Our analysis suggested that this revenue stream contributes ~8% to the company’s top line and a material 20% to its pretax profits. While we flagged the pricing levers available to Angel One across the cash and F&O segments, we await the SEBI’s final directives on this issue and potential broader regulatory actions on the F&O segment before making any changes to our FY25E and FY26E estimates.

The regulatory clampdown on core revenue pools notwithstanding, we maintain Add with a target price of Rs 2,750, valuing Angel One at 20 times Mar-26 EPS for its potent acquisition funnel and relatively secular business model.

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