Asian Paints Share Price Falls To Over Three–Year Low As Analysts Flag Growth Concerns In Near Term

Asian Paints Ltd.'s share price fell to the lowest level in over three years on Monday after brokerages flagged growth concern in the near term. The view came after the paint manufacturing company reported a miss on estimates by analysts on all fronts for July–September.

Asian Paints reported the lowest margin in last eight quarters, Jefferies said. High competition remained a matter of concern for its growth going forward. The brokerage maintained high–conviction 'Underperform' with a target price Rs 2,100, which implied a 24% downside from Friday's closing price.

Nomura cut the target price to Rs 2,500 from Rs 2,850, factoring second quarter results. The current target price implied a 10.79% downside from Friday's closing price. The brokerage trimmed EPS estimates by 13%. The brokerage has a 'Neutral' rating on the stock.

Nomura expected that Asian Paints topline and Ebitda will likely remain flattish in the second half as its peer has started to sell better mix products. However, volumes may improve in the second half due to postponement of demand in rural areas, the brokerage said in a note on Sunday.

Nomura expected Asian Paints' margin will improve from third quarter as soft raw material costs are seen from end of the second quarter, and full impact of a price hike has been absorbed in the second quarter, the brokerage said in the note.

CLSA reiterates 'Underperform' rating on Asian Paints with a target price of Rs 2,290 apiece, which implied 17% downside from Friday's closing price. The brokerage said that the competitive intensity continues to increase through the quarter with Birla Opus increasing footprint, which will raise the rebates going forward.

Asian Paints Q2 Results Highlights (Consolidated, YoY)

• Revenue down 5.3% to Rs 8,028 crore versus Rs 8,479 crore (Bloomberg estimate: Rs 8,581crore).

• Ebitda down 28% to Rs 1,240 crore versus Rs 1,716 crore (Bloomberg estimate: Rs 1,565 crore).

• Margins at 15.4% versus 20.2% (Bloomberg estimate: 18.2%).

• Net Profit down 44% at Rs 694 crore versus Rs1,232 crore (Bloomberg estimate: Rs 1,079 crore).

Asian Paints share price fell 7.89% to Rs 2,551.00 apiece. 

Asian Paints share price declined 9.51% to its lowest level since May 3, 2021. The stock was trading 8.02% down at Rs 2,547.25 apiece as of 03:27 p.m., as compared to 0.08% decline in the NSE Nifty 50 index.

The stock price has declined as much as 17.18% in 12 months, and 25.11% on an year-to-date basis. Total traded volume so far in the day stood at 9.16 times its 30-day average. The relative strength index was at 27.87.

Out of 39 analysts tracking the company, nine maintain a 'buy' rating, 11 recommend a 'hold,' and 19 suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 10.7%.