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HomeMarket NewsAsian Paints shares get their lowest price target as Morgan Stanley expects de-rating to continue
Morgan Stanley expects Asian Paints to lead the market share losses over the next three years, having lost 424 basis points worth of market share in the previous financial year, which is much higher than the brokerage's estimates.
Asian Paints Ltd., India's largest paints company has received its lowest price target on the street from brokerage firm Morgan Stanley on Tuesday, June 10.
Morgan Stanley cut its price target on Asian Paints to ₹1,909 from ₹2,126 earlier, implying a potential downside of 15% from current levels.
Apart from Morgan Stanley, CLSA (₹1,966) and Elara Capital (₹1,940) are the other two brokerages that expect Asian Paints' shares to fall below levels of ₹2,000.
India's paints industry is transitioning from a period of co-ordinated and disciplined double-digit value growth to a period of unchartered levels of hyper competition amidst de-linkages to the current cyclical macro story.
"While there is consensus on the sell-side on growth and ratings, we think the extent of a potential de-rating for paint stocks is not yet understood. We believe this de-rating is not done yet," Morgan Stanley said in its note.
Asian Paints' shares are now trading at a discount to discretionary stocks like Titan and Morgan Stanley expects this discount to continue. Additionally, the premium multiple that Asian Paints has to commoditised brands like UltraTech should narrow, given the escalating competition reduced pricing power, and uncertain market share outcomes, according to the brokerage.
Morgan Stanley expects Asian Paints to lead the market share losses over the next three years, having lost 424 basis points worth of market share in the previous financial year, which is much higher than the brokerage's estimates. "Over financial year 2025-2028, we expect Asian Paints to lose another 209 basis points of market share in the overall decorative paints business," the brokerage wrote, adding that the top five players, excluding Birla Opus will lose around 281 basis points of market share during this period.
In its bear case target, Morgan Stanley has a price target of ₹1,307 for Asian Paints where there would be increased competitive intensity, sluggish volume growth and weak margins.
Out of the 38 analysts that have coverage on Asian Paints, 22 of them now have a "sell" rating on the stock, 10 have a "hold" rating, while only six of them have a "buy" rating on the stock.
Shares of Asian Paints are trading 0.8% lower at ₹2,228.7. The stock also trades ex-dividend of ₹21.5 per share from today's trading session. The stock has remained flat so far this year.
