Asian Paints: Rural demand revival, new capacities should drive volumes

Things are now getting better even in the hinterland, led by normal monsoon, upward revision in minimum support price for kharif crops, and improvement in rural infrastructure

There is little doubt that consumer firms are in a sweet spot, with improving demand. But with reviving rural demand, some companies will perform even better. Asian Paints, for instance, which has underperformed its smaller peer Berger Paints in the past due to subdued rural environment, is one of those expected to regain its charm. While Asian Paints’ stock has risen 19 per cent in the last two years, Berger Paints is up 29 per cent, narrowing the valuation gap with the paints’ leader. Berger Paints is currently trading at 44 times and Asian Paints at 48 times the FY20