Overseas brokerages take a shine to Asian Paints

Asian Paints, India’s largest and Asia’s third largest paint company, seems to have caught the interest of international brokerage firms. A couple of brokerage firms including CLSA and Jeffries have turned bullish on the stock following which the stock price has gained ground.

CLSA has raised Asian Paints to a BUY from SELL with the target being hiked by 26 per cent to Rs 850 per share. “Asian Paints has corrected 22 per cent from recent peak due to concerns on weak macro, cautious management outlook and consensus EPS cut. We believe that the first half of FY16 would mark the bottom of earnings per share (EPS) downgrade cycle and expect growth to accelerate from the second half of FY16 as the volume base gets reset,” CLSA said in a note to investors.

The EPS for Asian Paints is likely to rise 23 per cent annually over period of 2015-18 due to pick-up in product sales and better operating margins, CLSA added.As far as Jeffries is concerned, the brokerage firm has revised its rating on the stock to BUY from HOLD with a target price of Rs 843 per share from Rs 800 per share. 

“We believe the worst of the demand cycle for the company is behind us. We expect Asian Paints to benefit from an improvement in urban discretionary spend as well as benign commodity prices. The stock has underperformed FMCG peers in the last 12 months to date and valuations look attractive given the strong earnings growth drivers and superior industry statistics,” Jeffries said in a note.

The stock of Asian Paints ended with a gain of Rs 16.85 (nearly 2.5 per cent higher) at Rs 727.50 on NSE on Thursday with volumes of 19.08 lakh shares following the news of the upgrades.