Inflation has returned to haunt India's paints sector after almost four years, courtesy the jump in crude oil prices. Crude oil derivatives make approximately 50% of paint raw material costs, including solvents, resins and emulsions. A rise in global crude prices due to geopolitical tensions has driven up input costs for paint makers.
A new HSBC report notes that a review of past cycles shows shifting trends in volumes, prices and margins, suggesting that the operating environment for paint makers is once again changing.
Keeping this in mind, the HSBC has maintained its hold ratings on Asian Paints Ltd. but has cut its target price to Rs 2,600 from Rs 2,900. The current market price of the stock is Rs 2,265. Similarly, the brokerage has also maintained hold ratings on Berger Paints India Ltd. but has cut its target price to Rs 500 from Rs 540. The current market price of the stock is Rs 430.85, citing moderated margin expectations.
The brokerage noted that while paint makers may attempt selective price increases to offset rising input costs, the broader sector remains constrained by competitive pressures and the uncertain trajectory of demand.
According to the latest brokerage note, HSBC noted that the price hikes by paint companies could help narrow the volume –value gap, but cautioned that the market and competitive structure is different now, which could limit potential benefits compared with previous cycles. Strong competition and evolving business models could continue to pose structural challenges, the brokerage said.
Asian Paints Share Price Today
Asian Paints Share Price Today
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Shares of Asian Paints fell as much as 1.49% with the stock trading at Rs 2,272.10 intraday. Out of 38 analysts tracking the company, 14 maintain a 'buy' rating while eight maintain a "hold" and six maintain a "sell" rating, according to Bloomberg data. The average 12-month consensus price target of Rs 2,767.35 implies an upside of 21.0%
Berger Paints Share Price Today
Berger Paints Share Price Today
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Shares of Berger Paints fell as much as 1.15% with the stock trading at Rs 431.80 intraday. Out of 25 analysts tracking the company, 12 maintain a 'buy' rating while five maintain a "hold" and eight maintain a "sell" rating, according to Bloomberg data. The average 12-month consensus price target of Rs 526.57 implies an upside of 21.1%
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