Stocks of paint companies were the center of attention, with industry giant Asian Paints hitting an all-time high of Rs 2,028, up 2.5% from BSE in intraday trade on Thursday, pending higher demand. The stock broke its previous high of Rs 2,016 hit on August 25, 2020.
That aside, Berger Paints India, Kansai Nerolac Paints and Shalimar Paints were up 2% each, compared to a 1.4% increase for the S&P BSE Sensex at 1:08 p.m.
Over the past month, Asian Paints has beaten the market by gaining 14% after surprising the streets with a better-than-expected revenue recovery in the April-June quarter (Q1FY21) and 14% growth in volume for the domestic decorative portfolio in the month of June.
JP Morgan analysts believe the focus is on market share with nimble execution on the ground; broadening the revenue base through the successful scaling up of new segments such as waterproofing (long growth path given very low penetration); and increasing margins and moderating capital spending to improve free cash flow (FCF) and yield ratios are the three main drivers of the paint business.
Add to that, the government has encouraged affordable housing across the country. It has taken some steps in recent years, including Pradhan Mantri Awas Yojana and Smart City Mission. These measures, analysts said, would stimulate housing demand and supply, in turn promoting the growth of concrete and paintable houses in India. In the next 4 to 5 years, these homes will enter the repaint cycle.
“For industry, subways and level I areas contribute around 25% in value, with small towns (level II / III / IV towns) and rural areas contributing 75% of the rest. In recent years, demand in smaller towns and villages has grown faster than metropolitan and Tier I cities. Increasing disposable income, additional consumer spending, increasing demand Awareness, development of rural markets and various launches have fueled the growth of the paint industry, ”analysts from Nirmal Bang Equities said in the paint industry update.
Since in today’s environment there is a preference for companies that are relatively more resilient, sector multiples at current short-term levels will appear expensive. The brokerage firm recently launched a hedge on Asian paintings with a cumulative rating with a target price of Rs 2,080 as the brokerage firm believes Indian decorative paintings will continue to experience higher demand in this space, mainly due to With the constant shift from unorganized to organized players with bigger players, the players gain even more shares.