Asian Paints Gets Lowest Price Target From Morgan Stanley As De-Rating Risks Linger

Asian Paints Ltd. has received its lowest price target yet from Morgan Stanley on Tuesday, with the brokerage slashing its target price on the stock to Rs 1,909 from Rs 2,126 earlier—signalling a potential downside of nearly 15% from current levels.

CLSA and Elara Capital also hold similar views, with targets of Rs 1,966 and Rs 1,940, respectively—all projecting the stock to fall below Rs 2,000.

Morgan Stanley’s downgrade is part of a broader sector call, as it warns of continued de-rating in India’s paint industry. According to Morgan Stanley, Indian paint companies are transitioning from an era of coordinated and disciplined double-digit value growth to one marked by hyper-competition and weakening correlation with macroeconomic cycles. The brokerage expects this ongoing structural transition to lead to further de-rating in sector valuations.

Three main factors underpin Morgan Stanley’s bearish stance:

• Macro Disconnect: Industrial paints are gaining traction in this cycle, while decorative paints—which account for 70–75% of the market—are seeing slower growth.

• Escalating Competition: The entry of Birla Opus and its ambitions to become the second-largest player are expected to increase competitive intensity from fiscal 2026 onwards.

• Incumbent Strategy Shift: Established players like Asian Paints are now prioritising market share defence rather than coordinated growth, leading to pricing and margin pressure.

Morgan Stanley expects Asian Paints to lose approximately 42 basis points of market share in financial year 2025—sharply higher than its previous estimate. Over fiscal 2025–2028, the company could lose around 200 basis points from its share in the decorative segment. Collectively, the top five players excluding Birla Opus are forecast to lose 281 basis points during this period.

The report highlights that while market share in the organised segment remains high—estimated at $10 billion annually with 75–78% held by key players—new entrants are scaling quickly and vying for top positions. Premium valuations, it warns, are at risk as competition drives pricing pressures and raises uncertainty over future outcomes.

The brokerage has also revised the target price of Kansai Nerolac to Rs 212 from earlier Rs 221. On the other hand, it has hiked the target price of Berger Paints to Rs 488 from the earlier Rs 466.

The shares of Asian Paints fell 1.17% to Rs 2,221.60 on Tuesday. However, it pared losses to trade 0.90% lower at Rs 2,227.60. This compares to a 0.07% decline in the NSE Nifty 50 Index.

It has fallen 24.24% in the last 12 months and 2.45% year-to-date. Total traded volume so far in the day stood at 1.2 times its 30-day average. The relative strength index was at 35.29.

Out of 38 analysts tracking the company, six maintain a 'buy' rating, 10 recommend a 'hold', and 22 suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 2.3%.