ASIAN PAINTS; THE STEADY ONE (BEST ENTRY PRICE)

In traditional Market circles there was a saying that one could buy Asian Paints at any point in time and be assured of a 25% return by the same time next year. Of course this was a bit of hyperbole, as most adages are, but it just demonstrates the kind of reputation the Scrip has always enjoyed, with the emphasis being on stability of returns. Anyway let us see what our Analysis throws up.

First looking at the TECHNICALS, we see that the 2 year and 5 year price Charts reveal that the DMA 300 and DMA 365 both have been rarely violated over the last 5 year period.; in fact the DMA 300 and DMA 365 have NEVER been violated during the last 2 years. The closest encounter with the DMA 300 was on 25/2/11 intraday wherein the Scrip bounced off the proximity of the 300 DMA smartly. On the 5 yr Charts the DMA 300 and DMA 365 were decisively violated ONLY during the period 1/10/2008 to 18/5/2009, which period, if memory serves me right, corresponds with the time that the prices of Titanium Dioxide (the key raw material input for the Paint Sector) had gone through the roof resulting in a crashing of Margins coupled with the growth slowdown in the Sector due to the global recessionary period. Thus, prima facie, the DMA 300 seems to be a good support for the Scrip. Said DMA 300 is at 2789 on the 5 year charts and DMA 365 at 2682 on the same. Looking at the 6 month Charts even DMA 150 at 2900 seems to be a reasonable support.

Briefly perusing the FUNDAMENTALS, we see that the Scrip has reported good Q1 numbers this Financial ; historical Sales growth is very consistent and Net Profit growth a tad susceptible to input costs, over the last few quarters. However, from its market leadership position in both Decorative and Industrial segments as well as its immense Brand pull and pricing power, it would be safe to assume a 15-20% Earnings growth over the next many Quarters. Currently at CMP 3094 it is trading at PE TTM 36 odd. FY 12 it could do an EPS of about 90 - 95 which puts the Stock currently at 34x - 32x FY12E.  I would discount a bit for the volatility of input costs and put a fair price at about 30x FY12E which works out to around 2700 - 2850. Therefore I would peg the fair price somewhere in the 2700-2850 range.

Combining both TECHNICALS AND FUNDAMENTALS, I would pip for a realistic best entry price range of 2900 downwards to 2750, for the long term Portfolio Investor.