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Asian Paints has been a market leader in the Indian paint industry for decades. The stock has consistently shown a robust performance, supported by strong fundamentals and market dominance. This analysis will break down Asian Paints stock price performance, financial metrics, and future predictions based on the provided data.
Stock Price Movement and Technical Indicators
The stock chart for Asian Paints shows the weekly price movement, including the 50-day and 200-day exponential moving averages (EMA). The 50-day EMA currently stands at ₹3052.49, while the 200-day EMA is at ₹2848.22. Asian Paints is trading near its 50-day EMA at ₹3039.75, indicating some level of resistance at the EMA level. This suggests that the stock may face pressure around this price range, but a breakout above could signal an upward trend.
The stock price has been moving within a consolidation zone, as depicted by the rectangular box. This range-bound movement highlights the ongoing battle between buyers and sellers. The support lies at ₹2670, while the resistance is around ₹3423. A decisive move beyond this range could indicate a new direction for the stock.
Additionally, the Relative Strength Index (RSI) stands at 48.51. An RSI value below 50 suggests the stock is neither overbought nor oversold, meaning there is room for upward movement if buying momentum picks up.
Market Capitalisation and Current Price:
Asian Paints boasts a market capitalisation of ₹2,91,404 crores, making it one of the largest companies in the Indian market, as per Screener’s data. The current stock price is ₹3038. The company has a high P/E ratio of 57.4, which indicates that investors are willing to pay a premium for its stock, a reflection of the company's growth potential and market confidence.
Dividend Yield and Return on Equity (ROE):
The company offers a dividend yield of 1.10%, which is relatively modest but consistent. The return on equity (ROE) stands at an impressive 31.4%, reflecting how efficiently the company is using shareholders' funds to generate profits. The three-year average ROE is recorded at 27.8%, further proving Asian Paints’ strong financial management.
Return on Capital Employed (ROCE):
The ROCE for Asian Paints is 37.5%, a solid figure showing that the company efficiently utilises its capital to generate returns. The high ROCE highlights the company’s strong profitability and operational efficiency.
Pros:
The company has delivered consistent profit growth, with a compounded annual growth rate (CAGR) of 20.5% over the last five years. This makes it a strong contender for investors seeking growth stocks.
Asian Paints has maintained a good ROE over the years, with a healthy dividend payout of 59.7%. This indicates that the company not only focuses on growth but also rewards its shareholders consistently.
Cons:
The stock is currently trading at 15.6 times its book value, indicating it might be overvalued. Investors need to exercise caution, especially if broader market conditions become unfavourable.
Comparing Asian Paints to its peers in the paint and varnish sector reveals its dominant position. With a market capitalisation of ₹2,91,404 crores, it dwarfs competitors like Berger Paints (₹64,468 crores) and Kansai Nerolac (₹22,412 crores).
P/E Ratio: Asian Paints has a P/E of 57.39, which is higher than Berger Paints (55.25) and Akzo Nobel (40.01). This suggests that while Asian Paints commands a premium, the market expects sustained growth from the company.
Profit and Sales Variability: Asian Paints reported a quarterly profit variation of -24.54% and a sales variation of -2.32%. Despite these declines, the company still reported net profits of ₹1186.79 crores and sales of ₹8969.73 crores in the recent quarter, significantly higher than its peers.
ROCE and ROE: Asian Paints has a higher ROCE of 37.50% compared to Berger Paints (27.51%) and Kansai Nerolac (16.56%), indicating better capital efficiency. Its 5-year ROE of 27.67% also reflects a strong performance compared to peers like Berger (22.89%) and Kansai Nerolac (11.76%).
Cash Conversion Cycle:
Over the years, Asian Paints’ cash conversion cycle has varied, reaching 93 days in March 2024. This slight increase from previous years suggests the company may be holding onto inventory longer, which could be a strategy to manage demand fluctuations or raw material costs.
Working Capital Days:
Working capital days have improved from 66 in 2023 to 62 in 2024. This signifies better efficiency in managing short-term assets and liabilities.
ROCE Trends:
The ROCE percentage has shown resilience, improving from 34% in 2021 to 38% in 2024. This upward trend signifies the company’s ability to generate more returns on its employed capital over time.
Profit and Loss Overview
Looking at the profit and loss statements, Asian Paints has shown consistent growth. Its total sales have grown from ₹10,504 crores in March 2013 to ₹35,282 crores in TTM (Trailing Twelve Months) 2024. Operating profit margins (OPM) have remained stable at around 19-22%, demonstrating operational efficiency.
Net profit has also increased significantly, reaching ₹5170 crores in the TTM of 2024 from ₹1160 crores in March 2013. The growth in net profit, along with increasing EPS (earnings per share) from ₹11.61 in 2013 to ₹52.96 in 2024, highlights the company’s profitability growth.
Balance Sheet Analysis
The company’s reserves have grown from ₹3,288 crores in 2013 to ₹18,632 crores in March 2024, showcasing a solid increase in retained earnings. The total liabilities also increased, reaching ₹29,901 crores in March 2024, driven by both borrowings and other liabilities. However, the company’s strong cash flows and profitability have ensured these liabilities remain manageable.
Future Stock Price Prediction
Asian Paints is well-positioned for growth. Based on its current technical setup, a breakout above ₹3423 could signal further upward momentum, with possible targets of ₹3600 or higher in the medium term. On the downside, support lies at ₹2670, and if breached, it could lead to a correction.
Fundamentally, the company’s growth story remains intact. With a solid ROE, consistent profit growth, and a leadership position in the paint industry, Asian Paints is expected to deliver steady returns over the long term. However, investors should keep an eye on its high valuation relative to its book value, as any market correction could present better entry opportunities.
