Inspect the whole region where you want to apply stucco. Arrange a pressure water sprayer and use it to remove loose paint chips from the surface of the wall. Even if the paint is in smooth condition, use the sprayer to clean the wall.
Rule of thumb is to hold the nozzle about a foot from the wall and set the pressure to about 1500 PSI.
There is no need to remove all paint particles from the wall, but it is important to get rid of the loose paint from the wall. This cleaning will also moisture the wall and prevents it from draining water out of the fresh stucco layer.
Use a concrete bonding agent to create an adhesive layer between the wall and to be applied stucco. You can either use a paint brush or a paint roller for this purpose. Ample time should be given to the adhesive agent to dry; a 24 hours break shall suffice.
Prepare stucco in a clean surface and make sure that you have ample water supply in available. Mix the required amounts of cement, sand and lime and add water slowly. Mix it well and keep on adding water till stucco turns into a semi solid paste.
Apply about a quarter of an inch coat on the wall using a trowel. Move the trowel in semi circles to give it a smooth look. Give it about half an hour break and then scratch it with the help of a wire brush. Now once again give the wall a 24 hours break.
Apply another ¼ inch coat of stucco over the wall with the trowel. This time around, use a metal trowel to give it a neat and finished look. Again give it a 24 hour break and after that apply a coat of paint with the help of paint sprayer.