Asian Paints shares fell 9%
On November 11, Asian Paints’ stock dropped more than 9% after a number of brokerages voiced dissatisfaction with the company’s poor Q2FY25 results in the face of a difficult demand environment and heightened competition.
The stock was down more than 7% at Rs 2,565 at 9:20 AM. It has underperformed the Nifty 50, which has increased by 10% over the same time period, with a loss of around 25% so far this year.
Due to the company’s notable operational shortfall, JPMorgan downgraded Asian Paints to ‘Underweight’ and lowered its target price from Rs 2,800 to Rs 2,400. In Q2FY25, the company’s profit-before-depreciation, interest, and tax (PBDIT) margin decreased from 20.3 percent to 15.5 percent. CEO Amit Syngle said, “Operating margins were impacted by the price reductions taken last year, higher material prices and increased sales expenses.”
With a target of Rs 2,290, CLSA maintained its ‘Underperform’ rating, pointing to lower customer sentiment that caused sales growth to lag behind rivals.
The company’s Q2FY25 operating revenue fell 5.3% year over year to Rs 8,003 crore, falling short of the Rs 8,528 crore predicted by the Moneycontrol poll. Compared to the poll’s Rs 1,205 crore prediction, the consolidated net profit dropped 42.4 percent to Rs 694.64 crore.
Nomura rated the stock as ‘Neutral’ and reduced its target price from Rs 2,850 to Rs 2,500. “While Asian Paints continued to see a lower mix, other players purposefully improved their mix by selling fewer low-value products (putty, distemper, primer, etc.).” The brokerage said, “We think overall sales and EBITDA will still look anemic/flattish, even though we think volumes can improve in the second half due to postponed demand and improvement in rural areas.”
With ‘Underweight’ and ‘Underperform’ ratings, respectively, Morgan Stanley and Jefferies also expressed caution. Jefferies voiced worries about Asian Paints’ widespread underperformance and competitive pressures, while Morgan Stanley pointed to weather-related effects and demand issues.
