Asian Paints Ltd. stock has received a target price and a double rating upgrade from multinational investment firm Jefferies, citing normalisation in gross margin and a more gradual pick-up in growth for rival Birla Opus this year.
The analysts at Jefferies have changed their rating from "Underperform" to "Buy" for Asian Paints, thus skipping "Hold", as they expect a gradual recovery in earnings starting this year for the paint company, which holds more than 50% of the market share.
The brokerage said Grasim Industries Ltd.'s Birla Opus exerted severe pressures at a time when paint industry growth rates softened. Management changes, coupled with high input cost volatility, also weighed on Asian Paints.
The company has faced headwinds including raw material price volatility, an increase in competitive intensity, and subdued domestic demand conditions.
Since January 2021, Asian Paints' stock has delivered a negative return of 15% compared to 82% for the Nifty 50 index, and the stock currently trades at 50 times the one-year forward price-to-earnings due to depressed earnings, the analysts noted.
"Going forward, we believe that Asian Paints should benefit from a normalisation in gross margin, a more gradual pick-up in growth for Birla Opus in FY26 after initial scale up in FY25 as well as expected improvement in demand conditions (on back of government measures to boost consumption, good monsoon, etc.)," Jefferies said in a note.
Asian Paints Target Price
Jefferies raised the Asian Paints share price target to Rs 2,830 from Rs 2,000 earlier, a 42% increase. The new target implies a return potential of nearly 16% over Tuesday's closing level.
Notably, the firm's target is the second highest among nine brokerages with a 'buy' call. HSBC has a target of Rs 2,900.
The stock has been upgraded from 'Underperform' to 'Buy' by Jefferies.
In terms of valuation, the Nifty stock is seen to trade at 55.6 times PE this year and 49.4 times in fiscal 2027.
Asian Paints Stock Movement
Shares of Asian Paints were trading 1.2% higher at Rs 2,514 apiece on the NSE at 9:20 a.m.
Shares of Asian Paints were trading 1.2% higher at Rs 2,514 apiece on the NSE at 9:20 a.m.
Shares of Asian Paints were trading 1.2% higher at Rs 2,514 apiece on the NSE at 9:20 a.m., compared to 0.1% decline in the benchmark Nifty 50. The stock has fallen 13% in the last 12 months and gained 10% so far this year.
The relative strength index was 64. The total traded volume stood at 1.3 times the 30-day average.
Of the 39 analysts tracking Asian Paints, 20 recommend 'sell', 10 suggest 'hold' and nine rate the stock 'buy', as per Bloomberg data. The average of 12-month price target implies a potential downside of 7%.
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