A week ago, Asian Paints Limited (NSE:ASIANPAINT) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 12% higher than the analysts had forecast, at ₹68b, while EPS were ₹12.91 beating analyst models by 34%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Asian Paints’ 27 analysts is for revenues of ₹249.7b in 2022, which would reflect a major 28% increase on its sales over the past 12 months. Statutory earnings per share are predicted to soar 35% to ₹38.66. In the lead-up to this report, the analysts had been modelling revenues of ₹241.7b and earnings per share (EPS) of ₹36.78 in 2022. It looks like there’s been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
With these upgrades, we’re not surprised to see that the analysts have lifted their price target 9.8% to ₹2,525per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Asian Paints, with the most bullish analyst valuing it at ₹3,150 and the most bearish at ₹1,633 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It’s clear from the latest estimates that Asian Paints’ rate of growth is expected to accelerate meaningfully, with the forecast 28% revenue growth noticeably faster than its historical growth of 6.4%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Asian Paints to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Asian Paints following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn’t be too quick to come to a conclusion on Asian Paints. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Asian Paints analysts – going out to 2023, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you’re looking to trade Asian Paints, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
#Asian #Paints #Limited #Beat #Analyst #Estimates #Consensus #Forecasting #Year