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Asian Paints slumps nearly 4% after Goldman Sachs downgrade

  • There are significant risks to sales growth given the macroeconomic slowdown due to covid-19
  • The stock has fallen 18.4% in ten trading days from its previous closing high of 1,852.3 on 27 April

MUMBAI: Shares of Asian Paints Ltd on Tuesday declined 3.7% to 1,511.95 after Goldman Sachs downgraded the stock to sell with a target price of 1,111 per share, citing lower volume growth in the next few years as the reason for downward revision.

Analysts at Goldman Sachs see significant risks to sales growth as they expect consumers to down-trade and extend their re-painting cycles given the macroeconomic slowdown. The brokerage firm forecast FY2022 and FY2023 volume growth to be 1.5 times of the real GDP growth, lower than the long-term average of 1.7 times.

“We expect volume growth to slow to an average of 6% over the next three years. We expect price/mix growth to be challenged down 4% in FY2021E due to price cuts and consumers down trading to the economy segment," the brokerage said in a stock update.

The paint maker's stock extended losses to the tenth consecutive session today. The stock has fallen 18.4% in ten trading days from its previous closing high of 1,852.3 on 27 April, 2020.

On a consolidated basis, Asian Paints' net profit rose 20.2% to 764.43 crore in the quarter ended December, against 635.83 crore in the same quarter last year. Revenue from operations increased by 3% to 5,420.28 crore in the December 2019 quarter against 5,263.04 crore in the year-ago period.


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