Asian Paints – Attractive entry point – top pick - Ambit

After a 17% fall in its share price over the past two months, Asian Paints currently trades at ~25x FY15 EPS. We see this as an attractive entry point for investment given a combination of strong structural drivers of growth for the sector (we expect ~15-17% CAGR) and Asian Paints' sustainable competitive advantages built around supply chain efficiencies and brand recall. Recent initiatives include: (a) proposed launch of a new premium interior emulsion in FY14; (b) better tracking of trucks in the supply chain on GPS systems; and (c) automation of inventory management at a depot level using bar-coding. Peers are unlikely to reduce the outperformance gap (which Asian Paints enjoys) over a short period of time. Consequently, we expect continued market share gains for Asian Paints (to 53% by FY18 from 51% currently), consistently high profitability and 19% revenue CAGR for the company over FY13-16. Asian Paints is amongst our top picks in the consumer sector, TP Rs493, 15% upside.

Source : Equity Bulls

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