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Business News/ Markets / Stock Markets/  Asian Paints share price extends fall after Q1 results; Should you buy, sell or hold? Check what brokerages have to say
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Asian Paints share price extends fall after Q1 results; Should you buy, sell or hold? Check what brokerages have to say

Asian Paints posted strong growth overall, with the domestic decorative segment growing 10% YoY in volume terms (on a 37% base) and relatively healthy value growth (on a 54.1% base) in Q1FY24.

Asian Paints’ consolidated revenue from operations during Q1FY24 rose 6.6% to ₹9,182.31 crore from ₹8,606.94 crore, YoY.Premium
Asian Paints’ consolidated revenue from operations during Q1FY24 rose 6.6% to 9,182.31 crore from 8,606.94 crore, YoY.

Asian Paints share price fell nearly a percent on Wednesday, extending its decline from a 4% fall witnessed in the previous session, after the company declared its Q1 results.

The paint maker reported a consolidated net profit of 1,574.84 crore in the first quarter ended June 2023, recording a 52% growth from 1,036.03 crore in the corresponding quarter last year.

Asian Paints’ consolidated revenue from operations during Q1FY24 rose 6.6% to 9,182.31 crore from 8,606.94 crore, YoY.

Sales in the international business declined by 1.4% to 695.1 crore from 705.2 crore on account of economic uncertainty, forex crisis and liquidity issues in key markets of Asia and Africa. 

Read here: Asian Paints Q1 results: Net profit jumps 52% to 1,575 crore; revenue growth at 6.6% YoY

With raw materials prices having deflated, analysts expect the company might consider price cuts going ahead. Some analysts have also flagged concerns over rising competition in the paint sector with the impending entry of Grasim would likely be weighing on incumbents’ minds while deciding the course of action in this regard.

Here’s what brokerages have to say on Asian Paints Q1 results:

Motilal Oswal Financial Services

The brokerage house noted that with the entry of new players with deep pockets and massive commitments to investments, the overall industry may see a shift in demand and margin structure due to heightened competition. 

“We remain cautious as the paints segment may not enjoy higher multiples of the past. It needs to be noted that the re-rating was a bigger driver of stock price appreciation for Asian Paints over the past five to six years, as the earnings CAGR has been in the 10-12% range," it said.

It reiterated Neutral rating with a target price of 3,120 per share, premised on 50xFY25E EPS.

Also Read: Tata Motors share price rises over 3% on robust Q1 results

Nuvama Institutional Equities

Asian Paints posted strong growth overall, with the domestic decorative segment growing 10% YoY in volume terms (on a 37% base) and relatively healthy value growth (on a 54.1% base) in Q1FY24, the brokerage noted. 

In spite of Grasim’s entry seven months down the line, Nuvama Institutional Equities remains positive on Asian Paints due to high entry barriers and its best-in-class R&D. 

It maintained a ‘Buy’ rating on the stock and raised target price to 4,045 from 3,880 earlier.

Kotak Institutional Equities

Asian Paints’ 1Q print (peak EBITDA margin at 23.1%, soft topline growth at 7% YoY) indicates a shift of focus to profitability from topline growth and market share. Asian Paints share gains from organized and unorganized have paused since the past 2-3 quarters, Kotak Institutional Equities noted. 

“It looks like the incumbent paint companies are keen on retaining the benefit of easing raw material prices in the ST to strengthen their war chest ahead of Grasim’s foray," it said. 

The brokerage expects a 200-300 bps decline in EBITDA margin and modest earnings growth over FY2024-26E, owing to the rise in competitive intensity. It maintained a cautious stance on the sector.

It has a ‘Reduce’ rating with a target price of 3,050 per share.

JM Financial

Asian Paints’ June quarter results were just a tad below our expectations. Volume growth of 10% was inline but adverse mix remained a drag and led a 2% miss on sales and EBITDA. On the positive side, gross margin progression was expectedly healthy and resulted in operating margin staying much ahead of management’s 18-20% band, JM Financial said.

The brokerage maintained a ‘Hold’ call and raised the target price to 3,575 per share from 3,480 earlier.

At 11:10 am, Asian Paints share price was trading 0.46% lower at 3,384.50 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 26 Jul 2023, 11:12 AM IST
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