1 month ago
Shares of Asian Paints Ltd., have received further downgrades and price target cuts after its September quarter results significantly missed analyst expectations. Analysts have cited rising competition and a blurred outlook behind cutting their ratings, price targets, as well as their Earnings Per Share (EPS) estimates for the years ahead.
Analysts tracking Asian Paints expect a potential downside of up to 25% from Friday's closing levels.
Asian Paints reported an overall volume decline of 0.5%, compared to an expectation of a growth between 6% and 8% on a year-on-year basis. Net profit nearly halved, margins narrowed by 480 basis points, while gross margins also declined by 260 basis points from the same quarter last year.
The management saying that demand conditions remain challenging, added to the already subdued sentiment. Shares of Asian Paints have already declined 19% from its recent peak of ₹3,422.
Brokerage firm Jefferies maintained its "underperform" rating on Asian Paints with a price target of ₹2,100, which implies a potential downside of 25% from Friday's closing levels.
Jefferies wrote in its note that it remains concerned on competition which has also blurred the future outlook for the company. It will review its estimates after the earnings call that the company is scheduled to hold on Monday, November 11.
JPMorgan has downgraded Asian Paints to "underweight" from its earlier rating of "neutral" and cut its price target
to ₹2,400 from ₹2,800 earlier. It said that domestic decorative paint volumes declined for the first time in the past decade, excluding the Covid-19 pandemic.
"While broader demand weakness has weighed on the overall industry growth in recent quarters, Asian Paints is lagging peers with differential expanding further in the second quarter both on the revenue and earnings front.
JPMorgan has lowered its financial year 2025 - 2027 EPS estimates for Asian Paints by 10% to 12% respectively.
Nomura remains "neutral" on Asian Paints with a price target of ₹2,500. The brokerage said that while volumes can improve in the second half of the current financial year due to postponement of demand and better rural demand, the overall sales and EBITDA for the company will still look "anaemic" to flattish.
Morgan Stanley is "underweight" on Asian Paints with a price target of ₹2,522, highlighting product mix, rising rebates, employee costs and higher selling expenses as the key monitorables.
CLSA too has a "underperform" rating on Asian Paints with a price target of ₹2,290.
Out of the 39 analysts that have coverage on Asian Paints, 19 of them have a "sell" or equivalent recommendation on the stock, nine of them have a "buy" rating, while 11 of them have a "hold" rating on the stocks.
Shares of Asian Paints fell as much as 9.3% in opening trade and are currently trading 7.5% lower at ₹2,562. The stock is now down 25% so far for 2024.
