Asian Paints Deep Dive: 27% Upside Potential Despite Q2 Headwinds - The Numbers Tell the Story

Dear Investors,

Today's deep dive analyzes Asian Paints' latest numbers and what they mean for your portfolio.

Innovation & New Products

• New Product Revenue: 12% of total (impressive for a mature company)

• Kitchen Segment: +9% growth in Q2 (emerging as a strong vertical)

• Bath Segment: +6% H1 growth

• Industrial Segment: ~8% H1 growth (outperforming decorative segment)

📉 Q2 FY2025 Performance Metrics:

• Revenue: ₹8,256 Cr (-6.7% YoY)

• EBITDA Margin: 16.4% (significant 530bps decline)

• PAT: ₹4,698 Cr (-7.52% YoY)

• Gross Margin: 280bps contraction due to 1.5% material inflation

💪 Growth Indicators:

1. H1 FY2025 Stats:

   • Volume Growth: +3.3%

   • EBITDA Margin: 18.5%

   • Value Decline: -4.8%

2. Innovation ROI:

   • New Products: 12% of total revenue

   • Kitchen Segment: +9% growth in Q2

   • Bath Segment: +6% H1 growth

   • Industrial Segment: ~8% H1 growth

3. Distribution Strength:

   • Retail Network: 1.67 lakh outlets

   • Industrial Revenue: 6-7% of total

4. 🔍 Valuation Metrics:

   1. - Current P/E: 47.4x

   2. - ROE: 31.4%

   3. - ROCE: 37.5%

   4. - Dividend Yield: 1.43%

5. 💰 Investment Case:

   1. - Target Price: ₹2,700-₹2,950

   2. - Current Price: ₹2,321

   3. - Potential Upside: 16-27%

   4. - Market Cap: ₹2,22,606 Cr

6. Key Growth Assumptions:

   1. - 5-year Volume Growth: 8-10% CAGR

   2. - Target EBITDA Margin: 18-20% - WACC: 11%

   3. - Terminal Growth: 4%

7. Risk Quantification:

   1. - Forex Impact: ₹56 Cr loss (Ethiopia)

   2. - Material Cost: 1.5% inflation in Q2

   3. - Industrial Gap: 6% vs competitors' 20-45%

8. Bottom Line: Despite near-term pressures, the numbers suggest robust long-term potential with a clear path to 27% upside. However, monitor material costs and competitive dynamics closely.

Detailed Report : https://fin.ctoi.in/asian-paints-q2-analysis-16-4-ebitda-amid-6-7-revenue-decline/

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