Asian Paints shares fell over 4 percent to ₹2,848.15 apiece in early deals today, (Thursday, July 18), after the blue-chip paint firm posted weak results for the quarter ending June 2024 (Q1FY25). However, the stock later recovered as much as 3.8 percent from its morning lows to its intra-day high of ₹2,956.75.
An investor recently shared on Reddit their regret over selling shares of Asian Paints following a disappointing quarterly performance and a subsequent stock price decline in. The investor admitted to acting hastily after the company reported underwhelming results, only to see the stock recover. This experience has served as a valuable lesson in the importance of patience and long-term thinking in stock market investing.
"I sold asian paints after bad results and market proved me wrong again.
Yesterday I received 100+ comments on why asian paints will not give upmove due to birla opus.
I sold the stock today and now asian paints recovered and I am in loss again
Damn, i shouldn't have done anything today," the user lamented in the thread.
Asian Paints announced its April-June quarter results for fiscal 2024-25 (Q1FY25) on Wednesday, July 17, reporting a 24.6 percent drop in consolidated net profit to ₹1,170 crore, compared to ₹1,383 crore in the same period last year.
The leading paint and decor company's total revenue from operations in the first quarter of the current fiscal dropped 2.3 percent to ₹8,943 crore, compared to ₹9,154 crore a year ago. The revenue was impacted by price cuts implemented in the previous quarter and a shift in mix.
Amit Syngle, Managing Director & CEO of Asian Paints, noted that the paint industry faced challenging demand conditions due to a severe heatwave and the general elections during the quarter. Despite achieving a seven percent volume growth in the decorative segment, supported by some improvement in rural markets, the company's overall value declined by three percent because of earlier price reductions and a shift in product mix.
Looking ahead, Syngle expressed optimism about demand conditions improving, driven by better rural sentiment and the gradual progress of the monsoon. He emphasised the company's commitment to growth through strengthening its brand presence, fostering innovation, and focusing on customer-centric strategies.
Asian Paints fell short of market expectations in Q1FY25 due to adverse factors like a severe heatwave and election-related disruptions impacting demand, according to analysts. Following this weak performance, several brokerage firms have reduced their target prices for the stock.
Citi, which maintains a "sell" rating on Asian Paints, lowered its price target from ₹2,600 to ₹2,400. It also cut EPS estimates for FY25-27 by 8% to 12%, noting that a recovery in rural demand could further negatively affect the company’s product mix.
Jefferies also revised its price target downward, now expecting the stock to reach ₹2,100, down from ₹2,200. The brokerage highlighted a multi-quarter low EBITDA margin, resulting in a 20% drop in EBITDA, and maintains an "underperform" rating. It emphasised that the performance issues were not related to increased competition.
ICICI Securities identified multiple headwinds for Asian Paints, including rising competitive pressures, higher commodity prices, and a slowdown in industry growth rates. It pointed out that as the market leader, Asian Paints is expected to drive industry growth, which may involve increasing distribution, investing in more on-ground staff, and boosting advertising spend. However, it believes these measures will take 12-18 months to show results and may impact near-term earnings. ICICI Securities has maintained a "Reduce" rating, adjusting its target price to ₹2,550 from ₹2,600, citing stretched valuations (P/E of 58.5x FY26E) and limited potential for margin expansion.
On an optimistic note, analysts at Nuvama Institutional Equities suggest that long-term investors could see the dip in Asian Paints' stock as a buying opportunity. They anticipate a potential recovery in rural consumption and future price hikes, maintaining a "Buy" rating with a target price of ₹3,450.
Asian Paints stock has shed 15.5 percent in the last 1 year and over 16 percent in 2024 YTD. The scrip has given positive returns in 5 of the 7 months so far this calendar year. It is up 1 percent in July so far, extending gains for the fifth straight months since March. However, the stock was in the red in the first 2 months of 2024, down 4.6 percent in February and 13 percent in January.
The stock hit its 52-week high of ₹3,566.90 in July last year and is currently 20 percent away from that peak. Meanwhile, it has advanced almost 7 percent from its 52-week low of ₹2,671.00, hit in May 2024.
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.
