Asian Paints Q2 Review - Temporary Margin Blip Provides Entry Opportunity: Prabhudas Lilladher

Prabhudas Lilladher Report

Asian Paints Ltd.'s Q2 gross margins were 140 bps lower than those achieved during Lehman crisis and we expect gradual margin recovery to set in from Q3 itself with significant pickup in margins in FY23.

APNT continues to remain a strong structural play given 1) double digit decorative paints industry growth 2) innovation and marketing to ensure sustained leadership position and 3) scale up in emerging segments.

We are changing FY22/FY23/FY24 EPS by -23.9%/-7.3%/2% on account of unprecedented input cost pressures, heightened volume focus in decorative paints and a move from “share of surface” to “share of space” in Homes.

We continue to remain positive on long term growth drivers led by

1) Market share gains in decorative paints from both organised and unorganised players due to strong focus on economy segment.

2) Increased distribution with addition of 40,000+ retail points.

3) Innovations and focus on high growth waterproofing/ construction aids segment

4) Ramp up in Kitchen & Bath business (PBT breakeven in Q2)

5) Foray into designer tiles and home décor business enabling Asian Paints to emerge as a complete home solution company.

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