Asian Paints shares hit record high

Shares of Asian Paints Ltd on Thursday hit a record high, gaining in nine out of 11 trading sessions, after most broking houses increased their target price on the stock as the company posted better-than-expected earnings.

The stock touched an all-time high of Rs.1,152.65 a share and gained as much as 8.56%, its maximum gain since 21 October 2013. So far this year, it has gained 29%.

At 10.16am, Asian Paints was trading at Rs.1,142 on the BSE, up 7.6% from its previous close, while India’s benchmark Sensex index rose 0.32% to 28,114.80 points.

Rivals Berger Paints India Ltd rose 4.3%, Kansai Nerolac Paints Ltd rose 5.2%, Shalimar Paints Ltd rose 10% and Akzo Nobel India Ltd rose 3%.

Most of the broking firms, including Credit Suisse, Morgan Stanley, PhillipCapital, Motilal Oswal and Antique Broking, have increased the target price of the stock.

The company reported an 18.5% increase in its June quarter consolidated net profit to Rs.552.56 crore as compared toRs.466.42 crore a year ago. Income from operations rose 10.23% to Rs.4,082.10 crore. The earnings before interest, taxes, depreciation and amortisation grew 21% to Rs.820.5 crore from Rs.678.3 crore a year ago.

“The decorative business segment in India registered double digit growth in the quarter. Lower raw material prices led to improved margins. Industrial business registered good growth in the industrial liquid paints category for the company’s JV, AP-PPG, while the other JV, PPG-AP, saw good demand in the Auto OEM and General Industrial segment. Our international business performed well aided by good growth in markets like Nepal, UAE and Fiji,” K.B.S. Anand, managing director and chief executive officer of the company, said in a notice to the BSE.

Credit Suisse has maintained a “neutral” rating on the stock and increased its target price to Rs.960 a share from Rs.880 a share; Morgan Stanley has maintained its equal weight target and kept a target price of Rs.875 a share; Antique Broking has maintained its “hold” rating and increased the stock’s target price to Rs.1,062 a share from Rs.933 a share; PhillipCapital has upgraded the stock to “neutral” and increased the target price to Rs.1,000 a share, while Motilal Oswal has maintained a “neutral” and revised its target price to Rs.970 a share.

“We have slightly increased our estimates for FY18 as input costs continue to be benign. The company has consistently delivered on topline and bottomline in the last five quarters, while other FMCG companies have struggled to deliver strong growth. Also, it has significant pricing power—despite significant fall in raw material prices, it has not been forced to drastically slash prices to defend market share. A revival in the economy will aid demand for paints,” broking firm PhillipCapital said in a note to its investors.

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