Asian Paints - Lion always Roars

Paint industry is probably the only sector having exhibited double digit growth in topline and bottomline for last 2 decades, while sector has just handful of sustaining companies like Asian Paints, Berger. Kansai and  Akzo Nobel, having captured this growth.

Asian Paints was ruling at Rs. 1,600 in the middle of June 2020 and now at Rs.2,700, after having touched life high of Rs. 2,870 on 11th january. Many shares have risen by 50% to 75% and so is Asian by about 64% in last 6 months. But if we rewind the clock and see the news floating then for the stock, it raises an eye brow.

Q1 numbers were feared to be a big wash out, as social distancing then was preventing anyone to get house painted. Second was fear of stake of 469.88 lakh shares, being 4.90% of Asian Paints, held by Teesta Retail Pvt Ltd. (a Reliance Industries WoS) coming in for selling, through block deals, which did not happen till now. Even valuatuons are seen reasonable with PE of 64x on a practical estimate of FY22e EPS of Rs. 42.

Not commenting on both the news seen vested or having blown out of proportion, but one thing is ceratin that - Clouds can never hide the Sun forever.