Asian Paints Share Price Falls To Over Three–Year Low As Analysts Flag Growth Concerns In Near Term

Asian Paints Ltd.'s share price fell to the lowest level in over three years on Monday after brokerages flagged growth concern in the near term. The view came after the paint manufacturing company reported a miss on estimates by analysts on all fronts for July–September.

Asian Paints reported the lowest margin in last eight quarters, Jefferies said. High competition remained a matter of concern for its growth going forward. The brokerage maintained high–conviction 'Underperform' with a target price Rs 2,100, which implied a 24% downside from Friday's closing price.

Nomura cut the target price to Rs 2,500 from Rs 2,850, factoring second quarter results. The current target price implied a 10.79% downside from Friday's closing price. The brokerage trimmed EPS estimates by 13%. The brokerage has a 'Neutral' rating on the stock.

Nomura expected that Asian Paints topline and Ebitda will likely remain flattish in the second half as its peer has started to sell better mix products. However, volumes may improve in the second half due to postponement of demand in rural areas, the brokerage said in a note on Sunday.

Nomura expected Asian Paints' margin will improve from third quarter as soft raw material costs are seen from end of the second quarter, and full impact of a price hike has been absorbed in the second quarter, the brokerage said in the note.

CLSA reiterates 'Underperform' rating on Asian Paints with a target price of Rs 2,290 apiece, which implied 17% downside from Friday's closing price. The brokerage said that the competitive intensity continues to increase through the quarter with Birla Opus increasing footprint, which will raise the rebates going forward.