515% Dividend Payout: India's Largest Paint Stock's Growth Story Intact Ahead, 26-33% Upside Seen

Asian Paints is the largest paints company in India in terms of market share. This paint stock is in the news for several reasons. Firstly, for healthy September quarterly earnings and secondly for dividend payout to the tune of 515% to shareholders. This paint stock has held dominance in the industry due to its growth story which is expected to stay intact going forward. Hence, brokerages like Asian Paints share prices and have recommended buying.

Next week, Asian Paints will be in focus as its share price will trade ex-dividend on November 3rd for a 515% dividend payout.

As per the regulatory filing, Asian Paints declared an interim dividend of Rs 5.15 per share of the face value of Re 1 each for the financial year ending 31st March 2024.

The record date to determine the entitlement of the shareholders for interim dividend has been fixed as Friday, 3rd November 2023, and the dividend will be paid to the shareholders on or after Monday, 13th November 2023.

Coming to the healthy quarterly earnings, Asian Paints reported a consolidated net profit of Rs 1,205.4 crore in Q2FY24, rising by 54% YoY. While consolidated revenue was marginally up to Rs 8,451.9 crore.

Amit Syngle, Managing Director & CEO of Asian Paints Limited said, looking towards the second half of the year, the company remains optimistic about improved demand conditions well supported by the longer festive season and the overall buoyant domestic economic growth.

Religare Broking highlighted the concall with Asian Paints management. They are ---

1) Sales in Q2FY24 were largely impacted because of the festive season postponed in Q3FY24, but expect 2HFY24 to be better driven by festive and marriage demand and a boost in government spending.

2) Going ahead focus remains on growing the decorative and home décor segment as well and strong traction from the auto & industrial segment bodes well.

3) Management remains cautious on evolving geopolitical issues as they may impact crude & other input costs and also will keep a watch on macro-economic concerns in international markets.

4) New products contributed ~11% of the overall revenues.

5) High single-digit growth was seen across urban markets while rural is still seeing pickup.

6) It continued with the expansion of its distribution footprint and added ~2,500 touchpoints in Q2FY24.

7) Economy range contributed to the mix while luxury products are seeing reasonable traction.

8) Innovation continues in Q2FY24, have introduced Royale designer palette-Shvet (Indian whites & Ivories), Ador wall coverings, New painted forest wall collection, Nilaya naturals ecosystem, etc.

9) Home décor contributes ~4% of decorative revenue.

10) The company announced an interim dividend of Rs 5.15/share.

Following this, Religare's analysts on Asian Paints valuation said, "We believe industry tailwinds such as festive demand, marriage season and government spending towards infrastructure & housing and demand from real-estate will aid growth for the paints sector and Asian paints being a leader will benefit from it. Additionally, the company's plan of innovating products along with focusing on expanding in the decorative segment by growing its home décor bodes well."

Along with it, Religare's note further said, "focus is on growing industrial, Automotive and coating businesses. Further, easing raw material prices as well as efficiency measures taken by the company aids in margin improvement. On a financial front, we estimate its revenue/EBITDA to grow at 18%/27.8% CAGR over FY23-25E and maintain a Buy rating with a target price of Rs 3,939."

Meanwhile, Centrum's analysts in their note said, "We expect APNT to emerge as a strong player, moving from share of surface to share of space inside home in line with its core strategy: (1) upgrade volumes using innovations in economy/ luxury emulsions, (2) grow project/institutional business, (3) expand waterproofing business, (4) grow rural reach and (5) gain volume market share, yet balance margins. We believe it is a structural growth story, capturing demand across segments and town classes. Considering lower 1HFY24 we cut earnings for FY24E/FY25E by 7.8%/7.5% and introduce FY26E and retain BUY, with a revised DCF-based TP of Rs3,730 (implied 64.3x avg. FY25E/FY26E EPS). Key risks to our call include weak demand conditions, rise in crude oil prices & rising competition."

From the current market price level and taking into consideration both Centrum's and Religare's target price, the Asian Paints share price has a potential of over 26% to 33% upside going ahead.

Asian Paints along with its subsidiaries have operations in 15 countries across the world with 27 paint manufacturing facilities, servicing consumers in over 60+ countries through Asian Paints, Apco Coatings, Asian Paints Berger, Asian Paints Causeway, SCIB Paints, Taubmans and Kadisco Asian Paints. Asian Paints also offers a wide range of Home Décor products and is an emerging strong player in the Home Improvement and Décor space in India.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.