Asian Paints, Nerolac, Indigo Paints in focus: ICICI Securities says sales to remain subdued for next 3-4 months

Domestic brokerage firm ICICI Securities has said that primary sales of paints, according to paint dealers, were impacted materially (declined for some dealers) in Oct-Nov last year. The report said that there was trade up-stocking in base quarter due to 22 per cent price hike. However, consumer off-take has remained largely stable. 

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The dealers, according to the report, expect the market to remain subdued for the next 3-4 months and expect recovery only in Q1FY24. The report mentioned four reasons for the impact:

1. There is re-emergence of smaller/ unorganised players. They are likely to regain some lost market shares.

2. While paint inflation has cooled off now, the labour inflation remains high and is likely to result in higher overall painting charges.

3. Due to rise in spending on travel/tourism, automobiles, marriages and festivals, the spends on paints have slightly moderated.

4. Earlier consumers used to pay separately for painting and waterproofing charges but now both services are offered by painters and it results in some savings for consumers.

ICICI Securities has tagged Buy for Akzo Nobel while saying that it is the only paint stock in their coverage that is preferred as a turnaround pick. 

For Asian Paints, Kansai Nerolac and Indigo Paints, the brokerage has tagged Hold rating and has given a Reduce rating on Berger Paints.

Meanwhile, brokerage firm Macquarie in a report said that it is bullish on Asian Paints. It has maintained an Outperform rating and revised the price target to Rs 3750 from Rs 3700.

On Berger Paints, it has slashed the price target to Rs 500 from Rs 525 while maintaining Underperform rating.

Individually on NSE today, Asian Paints quoted Rs 3,034.85 per share, Berger Paints Rs 577.90, Kansai Nerolac Rs 430.90, Akzo Nobel Rs 2,241.10 and Indigo Rs 1,307.50 apiece around 1 PM.

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