Asian Paints share price hits record high post Q1 results; brokerages upbeat

Asian Paints share price rose nearly 2 per cent to hit its lifetime high after country's biggest paint maker by market capitalisation, reported a 31 per cent growth in Q1 profit, beating street estimates. 

Asian Paints stock gained as much as 1.6 per cent to a record high of Rs 1,490.60 on the BSE. The scrip has added over 27 per cent so far this year. By Comparison, Sensex has rallied over 8 per cent.

According to analysts at global brokerage CLSA, the recent cut in GST rate will improve growth outlook for Asian Paints as organised industry should benefit. Gains from lower GST would be instantly passed on, but there are near-term concerns on margins, as product price hike may be difficult, it added.

The brokerage raised country's EPS estimate by 3-4 per cent to factor in better margins. CLSA cut rating to “outperform” from “buy”, but raised target price to Rs 1,600 from Rs 1,460.

Meanwhile, analysts at Jefferies raised estimates for FY20 by 6 per cent factoring in better volume recovery on the back of recent rate cuts, market share gains, and some margin improvement.

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"While in near term there may be some pressure on margins due to inflationary pressures and delayed price hikes, believe that strong operating leverage and some recovery in units and JVs will offset these," they wrote in a research note.

Jefferies raised target price to Rs 1650 from Rs 1385 earlier, retaining “buy” rating.

As per Thomson Reuters Eikon data, 17 of 32 brokerages rate the stock “buy” or higher, 12 “hold” and 3 “sell” or lower; their median PT is Rs 1400.