Management seems reasonably confident in sustaining this momentum going forward, subject to uncertainties that the upcoming election (Q1FY20) could pose.
Asian Paints volume growth over the last 10 years has been an average 11 per cent, which is one of the highest in consumer space. It also has a consistent price hike history with an average price hike of 4 per cent the in the last 7 years.
Brokerage firm Reliance Securities re-initiates coverage on Asian Paints with a ‘BUY’ recommendation with a target price of Rs 1,550.
Analysts expect Asian Paints to witness a 13 per cent volume growth in FY19E following solid traction in Q3FY19, which saw 24 per cent YoY revenue growth with the decorative segment registering around 20 per cent YoY volume growth.
Though near-term headwind in the form of General Elections could pose some challenges, Asian Paints' long-term themes of unorganised to organised conversion and premiumisation continue to remain intact, it said.
“Operating margin compression of 120bps in Q3FY19 was entirely gross-margin led, but considering the reverse move seen in crude-oil prices in recent months, we expect the margin pressure to definitely ease over coming quarters,” analysts at JM Financial said in company update. The brokerage firm has ‘BUY’ rating on the stock with a target price of Rs 1,540.