Asian Paints Q1 Results Review - Market Dynamics Yet To Play Out; Reduce: Prabhudas Lilladher

Prabhudas Lilladher Report

Asian Paints Ltd. maintained double-digit volume growth guidance for FY25, having overcome major headwinds in Q1, green shoots in rural markets, improved monsoon conditions, increase in infra activities post elections and hopes of positive festive season impact.

The domestic outlook remains positive across decorative, auto, and industrial segments, while International business faces uncertainty due to geopolitical issues.

The Home décor segment is sustaining growth while economy paints are likely to benefit from recently launched Neo Bharat.

However, we cut FY25/26/27 EPS estimates by 10.4%/8.4%/6.3% due to limited margin improvement potential (all-time high levels ex Covid year) due to material price inflation (1% price hike in July, more might follow), increased spending on distribution, advertising, and supply chain amid rising competitive intensity following Grasim’s entry.

Next few quarters are crucial to assess the impact of Birla Opus on the market and Asian Paints. We now estimate decline of 7.2% in FY25 PAT (24.5% in Q1) and 4.1% growth in FY26.

Asian Paints trades at 54 times FY26 earnings per share and 52.7 times June26 EPS.

We cut DCF based target price to Rs 2605 (Rs 2672 earlier). Retain Reduce rating on the stock.

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