Buy Asian Paints For Target Price Of Rs 3740, 3 Months Return Up To 10%: ICICI Direct

ICICI Direct has given buy rating to the stock of Asian Paints with a target price of Rs 3740 apiece with a potential return of 9.9% in 3 months period. The company has registered good quarterly growth in recent results. It is a company with low debt.

Asian Paints Ltd Stock Outlook

The current market price of the stock is Rs 3431 apiece on NSE. The stock's 52-week high is Rs 3590 apiece and 52-week low is Rs 2560 apiece, respectively. According to ICICI Direct, if you buy the stock at its current market price, it has the potential to offer a return of 9.9% in 3 months with a target price of Rs 3740.

Asian Paints Ltd Return In 5 Years

The stock has given a return of 182% in last 5 years, 112% in last 3 years, and 4% in 1 year.

Asian Paints Ltd Weakness/ Strengths

It has several strengths such as it is a low debt stock, recorded growth in net profit with increasing profit margin (QoQ), and good quarterly growth in recent results. It has a few weak areas too that may include inefficient use of capital to generate profit, RoCE declining in last 2 years, inefficient use of shareholders funds, and growing costs YoY for long term projects.

Asian Paints Ltd Technical Outlook

The share price of Asian Paints is in a well-established secular uptrend and has generated stable returns for long term investors on a consistent basis over the past many years. The stock after last two week's breather is witnessing buying demand from the support area of ₹ 3200-3250 as it is the confluence of the recent breakout area and the rising 10 week's EMA (currently at ₹3267).

The current decline in crude oil prices also provides support to the bullish stance, thus providing a good entry opportunity. Key observations are that the stock has recently completely retraced its six month's decline (₹ 3590-2560) in just two months. A faster retracement in less than half the time interval signals strength and a robust price structure.

According to ICICI Direct, "We expect the stock to maintain positive bias and head higher towards ₹ 3740 as it is the 161.8% external retracement of the last two week's breather (₹ 3545-3237)."

Asian Paints Ltd Financial Outlook

Asian Paints (APL) is India's largest decorative paint company with ~ 50% value market share. The company derives ~98% revenue from the paints business while 2% business comes from the home improvement business (kitchen and bathroom fittings. The company has a strong distribution network of 70000 dealers, which is 2x more than the No. 2 player.

As of Q1FY23, Asian Paints has 1,50,000 retail touchpoints. It also launched 10 new products across its categories and added 5000 new retailing points in Q1FY23. The company is planning to expand its Premium and Luxury product categories as they have shown good growth in Tier 1 and Tier 2 cities.

Owing to a revival in real estate, housing, government and factories segment, the company's B2B business (which contributes ~20% to the topline) has gained traction in recent times.

Asian Paints Strong Supply Chain And Balance Sheet

According to ICICI Direct, "Going forward, we believe Asian Paints' strong supply chain network and robust balance sheet will protect the margins of the company. We build 15% revenue CAGR and 33% PAT CAGR for Asian Paints in FY22-24E. The balance sheet condition of the company has remained robust with cash surplus status and RoE, RoCE of 25%, 30%, respectively."

Asian Paints About

Asian Paints Limited is engaged in manufacturing paints. This company was established in 1942. The company is an Indian multinational paint manufacturing company engaged in manufacturing, selling and distributing paints and products about home decor, bath fittings, and related services.

The company has its headquarters in Mumbai. In 1945, Asian paints Ltd. was incorporated, and the company changed its name to Asian Paints (India) Pvt. Ltd. in the year 1965. The company has its market capitalization Rs 329,105 crore.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.