The sentiments of the Indian market seem to be seesawing as bulls and bears are giving tough competition to each other. Despite delivering a breakout above 18,000 a few sessions ago, the benchmark Nifty 50 index is facing some trouble continuing its up move. For those looking to park their money in a relatively safer stock, they should have a look at Asian Paints (NS: ASPN ) Limited.
It is a blue-chip paint manufacturer with a market capitalization of INR 2,71,696 crores, making it the largest listed player in the country. The importance of having a blue-chip stock that is a sector leader in the portfolio during volatile times is a no-brainer. Another thing that makes it look attractive at the current level is its beaten-down price.
The stock marked its lifetime high of INR 3,590, back in January last year. From there it is currently down to INR 2,822, reflecting a decent cut of over 21%. However, there is still some room on the downside and the stock could further slide to strong monthly support of around INR 2,600 and it’s up to the investor to take his/her call.
On the valuation front, the stock is trading at a P/E ratio of 89.65, compared to peers such as Berger Paints (NS: BRGR ), Kansai Nerolac Paints (NS: KANE ) and Indigo Paints Ltd (NS: INDG ), all of which are trading at a P/E ratio of 65.59, 62.06 and 62.53, respectively. This might make Asian Paints a bit on the expensive side which is somewhat true, but as it is a market leader, investors always tend to give it a higher premium on the valuation. The company has a market share of around 63%.
Another thing that would work in the favor of all paints manufacturer is lower oil prices. Currently, brent oil is trading at around US$83 per barrel after falling considerably from the November 2022 peak of around US$100 which is a relief for all oil-dependent industries. As long as oil prices are staying at lower levels, we could see margin expansion from paint manufacturers.
Looking at the shareholding pattern of the company, DIIs have consistently increased their stake from 3.97% in the September 2021 quarter to 5.53% in the December 2022 quarter.
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