Fundamentals

ASIAN PAINTS 

Ticker : 500820
BUY: Rs 1320
Target: Rs 1487 

Asian Paints is the market leader in the Indian paint industry with a market share of ~53 per cent. In first phase of expansion, the company has commenced Mysuru plant in Sep 2018 with an installed capacity of 300,000 KLPA. The Vizag plant is on course to be commissioned in 4QFY19. The company plans a total capex of Rs. 800 crore on these two plants with an additional capex of Rs 200 crore. Consequently, the company’s logistics cost is likely to come down as these plants are in close proximity to the key high demand geographies. Notably, the declining crude oil prices (Brent crude below $70) will aid company’s profitability in the coming quarters. Besides, the company is likely to hike prices to offset higher input prices which would be margin accretive. Considering all these, we recommend a BUY on this scrip. 

BHARAT FORGE 

Ticker : 500493
BUY: Rs 586.05
Target: Rs 670

Bharat Forge is involved in steel forgings, finished machined crankshafts, and front axles assembly and components. The company reported strong set of numbers in Q2 of FY19. Its revenue for the quarter surged almost 34 per cent yoy to Rs. 1679.2 crore. EBITDA for Q2FY19 stood at Rs. 475.4 crore, up by almost 29 per cent from Q2FY18. Also, the net profit for the period jumped almost 32 per cent yoy to Rs. 268.5 crore. New product launches in aluminium forging segment are likely to aid revenue growth as forging for car chassis has robust prospects due to BS-6. The company’s management expects existing product and technology to clock organic growth of 10‐12 per cent. Besides, its new forging and machining facility is likely to commence operation during first half of FY20. Thus, we recommend a BUY on this scrip