Asian Paints: The stock of Asian Paints, which enhances the colour of every home, can make the portfolio colorless, what is the reason

Asian Paints Share Today / Paint Stocks :The quarterly results of Asian Paints, which adds colour to every home, were weak, due to which the shine of the stock has weakened today. Today, the stock of Asian Paints fell by more than 4 percent to Rs 2842, while the closing price in the last session was Rs 2974. The company’s results have been affected due to the increase in raw material cost in the paint industry, increasing competition and weak demand due to summer and elections. Brokerage houses are also alert about the stock and are advising to sell it. They believe that there will be pressure on the stock for now and it can make the investors’ portfolio colorless.

Asian Paints Limited’s profit in the June quarter fell by about 25 percent to Rs 1186.79 crore, while in the same period of the previous financial year, the profit was Rs 1574.84 crore. The company’s operating income fell to Rs 8969.73 crore from Rs 9182.31 crore in the same quarter a year ago. Total expenses increased to Rs 7,559.04 crore.

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What does the brokerage house have to say?

Brokerage House ICICI Securities says our model FY25E will be impacted by: (1) a slowdown in industry growth after strong growth in FY21-H1FY24; (2) rising commodity prices after deflation in FY24; and (3) intense competitive pressure in the paint industry. Asian Paints (APNT) will have to take several tough decisions in FY25 to support margins or market share. While it needs to raise prices to impact input inflation, it also needs to increase advertising spends and other measures to accelerate growth.

Its pricing gap may also not be much compared to new competitors, as large pricing gaps may result in loss of market share. Asian Paints also needs healthy profitability in the decorative business to raise funds for investing in its new businesses like Beautiful Homes/Home Decor. The brokerage believes that launches at the lower level of the pyramid may lead to higher volume growth, but value growth may remain slow.

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Brokerage House Motilal Oswal has given a neutral rating on Asian Paints and a target price of Rs 3150. The brokerage says that there is no change in EPS estimates. The company launched “Neo Bharat Latex Paint” in January 2024 to compete with the unorganized sector, which is affordable for consumers. With the entry of new players with deep pockets and large scale for investment, the overall industry may see changes in market share and cost structure. These factors will be majorly watched in FY25. The brokerage says that we are cautious about both value growth and margins in FY25/FY26. Despite the correction in the stock, the pressure of competition is still around earnings.

Brokerage House Jefferies Asian Paints says FY25 has started weakly, with first quarter earnings and margins weaker than expected. Management says the results were also impacted by high raw material prices. EBITDA margins were the lowest in several quarters, while EBITDA declined by 20 per cent on an annual basis.

Brokerage House JP Morgan says that the first quarter has been weaker than expected for Asian Paints due to weak margins and sluggish revenue growth. Poor mix and sluggish demand impacted revenue. While Goldman Sachs says that the company is facing increasing challenges in the paint sector. EBITDA margin was affected due to increased expenditure on staff and advertising. Further pressure may be seen due to increased competition.

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Rating and target price on the stock

Motilal Oswal has given a neutral rating on Asian Paints and has given a target price of Rs 3150.

Brokerage house Jefferies has given underperform rating on Asian Paints shares and reduced the target price to Rs 2100.

Brokerage house ICICI Securities has also given REDUCE rating to the stock and reduced the target price to Rs 2550.

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Brokerage house Incred Equities has given REDUCE rating on Asian Paints and has set a target price of Rs 2620.

Goldman Sachs has given Neutral rating to Asian Paints and has set the target price to Rs 2750.

Brokerage house JP Morgan has also given Neutral rating on the stock and reduced the target price to Rs 2800.

Citi has given Sell rating on Asian Paints and reduced the target price to Rs 2400.

UBS has given a Buy rating on Asian Paints and has given a target of Rs 3650. The current price of the stock is Rs 2974.