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Asian Paints Q1 Results Review: Analysts Cut Target Price As Rising Costs Hit Profit

Asian Paints' net profit fell 24.6% on-year to Rs 1,187 crore in the quarter-ended June, missing the estimated figure of Rs 1,407.3 crore.

<div class="paragraphs"><p>An Asian Paints container outside a hardware store in Mumbai. (Photographer: Vijay Sartape/NDTV Profit)</p></div>
An Asian Paints container outside a hardware store in Mumbai. (Photographer: Vijay Sartape/NDTV Profit)

Several brokerages lowered Asian Paints Ltd.'s target price and earnings estimates, citing increased competitive pressures and rising costs as significant concerns.

The paint maker's first-quarter profit fell, with revenues declining on account of a high base, price cuts and subdued demand. India's largest paintmaker saw a 24.6% year-on-year dip in consolidated net profit to Rs 1,187 crore in the quarter-ended June, according to an exchange filing. That compares with the Rs 1,407.3-crore consensus forecast of analysts tracked by Bloomberg.

Asian Paints Q1 Results Key Highlights (Consolidated, YoY)

  • Revenue fell 2% to Rs 8,969 crore (Bloomberg estimate: Rs 9,318.4 crore).

  • Operating profit declined 20% to Rs 1,694 crore (Bloomberg estimate: Rs 1,965.4 crore).

  • Margin shrank to 18.9% from 23.1% (Bloomberg estimate: 21.1%).

  • Net profit fell 24.6% to Rs 1,187 crore (Bloomberg estimate: Rs 1,407.3 crore)

Despite some optimism regarding demand recovery and strategic initiatives, the paint giant faces a challenging environment, reflected in the downward revisions of target prices and earnings estimates.

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Here is what brokerages have to say on Asian Paint's first-quarter results.

Jefferies

  • Retained 'underperform' on the stock with a target price of Rs 2,100 apiece, implying a downside of 29% from previous close.

  • International revenue declined 2%.

  • International profitability saw a sharp decline due to loss in Asia and the South Pacific.

  • Infra demand is subdued due to elections.

  • Cut earnings per share estimate for fiscal 2025-2027 by 1-7%.

  • Valuations are around 50 times earnings-per-share, which is expensive.

Citi Research

  • Reiterated 'sell' call on the stock and cut the target price to Rs 2,400 apiece from Rs 2,600 per share earlier, implying a downside of 19% to previous close.

  • Expects around 8% gap in volume and value in the near term.

  • The July 2024 price hike was only 1%, and a rural demand uptick can further hurt the product mix.

  • Increased competitive intensity will keep margins under pressure.

  • Sees revenue growth and Ebitda margins at 3% and 18.7%, respectively for fiscal 2025.

  • Earnings per share may fall 13% YoY.

  • Expects to see an impact of the Birla Opus launch in the industry.

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Nomura

  • Maintained a 'neutral' rating on the stock and reduced the target price to Rs 2,850 apiece from Rs 2,925 per share earlier, implying a downside of 4% from previous close.

  • Murphy’s law is playing out; fiscal 2025 will see weak earnings growth.

  • First-quarter fiscal 2025 volumes growth of 7% year-on-year missed management guidance of double-digit growth.

  • Cut earnings per share for fiscal 2025, 2026, and 2027 to 7.8%, 6.4%, and 5.7%, respectively.

  • Low earnings growth due to the overhang of higher competition in the sector.

  • Expects compound annual growth of 7% in earnings per share over fiscal 2024–2027.

  • Downside risks: Lower than expected volumes, margins, and higher than expected competitive intensity.

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Goldman Sachs

  • Maintained 'neutral' rating on the stock.

  • Target price reduced to Rs 2,750 apiece, implying a downside of 7% to previous close.

  • Second consecutive quarter of revenue decline.

  • Employee cost increased 23% after one-off cost reversal.

  • Expects festive season to face intense competition.

JPMorgan

  • Rated 'neutral' and lowered target price to Rs 2,800 apiece from Rs 2,870 apiece earlier, implying a downside of 6% from previous close.

  • Company's success in premium segments will be crucial.

  • Expects negative share price reaction.

  • Intensive competition to threaten margins.

UBS

  • Maintained 'buy' on the stock and revised target price to Rs 3,650 apiece from Rs 3,550 per share earlier, implying an upside of 23% from previous close.

  • Demand impacted by heatwave and elections.

  • Gross margin impacted due to raw material inflation and weak product mix.

  • Lower than anticipated margins in fiscal 2025 due to higher staff cost.

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On the NSE, Asian Paints' stock fell as much as 4.45% intraday on Monday, before paring loss to trade 2.01% lower at Rs 2,914.5 per share, compared to a 0.33% advance in the benchmark Nifty 50 as of 9:40 a.m.

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