Asian Paints Q3 Result Review - Multiple Triggers For Structural Correction In P/E Multiples: ICICI Securities

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .ICICI Securities Report.Asian Paints Ltd.'s double digit volume growth in Dec-22 is just optically higher considering there was high inventory in trade in Dec-21 and primary sales were weak in Dec-22, in our view. While there was a lot of noise in Q3 FY23 due to prolonged monsoon, early Diwali, correction in raw material prices and strong base quarter, we note three structural factors which indicate the price/earnings multiples are likely to decline as-the portfolio mix continues to deteriorate with weaker consumer sentiment, higher sales of putty, primer as well as institutional/ projects sales. If we assume a P/E of ~20 times for institutional and putty/primer business, paints segment is valued at P/E more than 70 times for FY24E,the Ebitda margin range is targeted at 17-20%, much lower than historical 21-22%. Structural reduction of 250 bps in Ebitda margin is likely to hurt discounted cash flow valuation by 8-10% andwith Asian Paints reaching 150,000 outlets, there is limited scope to expand distribution. Average annual revenue/outlet is now lower than Rs 1.4 million. It is tough to run a store profitably with such small turnover which indicates Asian Paints has hit the ceiling to add new stores (in near term in our view)..Click on the attachment to read the full report:.Asian Paints Q3 Review: Shares Fall As Analysts Peg Competition, Capex As Headwinds.More Research Reports On Asian Paints' Q3 FY23 Results Review.Muted Sales Growth Leads To Earning Miss: Motilal OswalOverall Improvement Expected Here On: Dolat Capital.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Asian Paints Q3 Result Review - Multiple Triggers For Structural Correction In P/E Multiples: ICICI Securities

Asian Paints reported consolidated revenue, Ebitda and PAT growth of 1.3%, 4.5% and 5.7%, respectively YoY.

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