Asian Paints continues its losing streak for fourth session; hits 52-week low price

Continuing its losing streak for the second day in a row, shares of the country's leading paint manufacturer tumbled to a new 52-week low price. In two days since the release on the company's earnings on Saturday, the stock has been losing ground. While in the past four sessions, it has lost as much as 15 per cent taking into account today's low price.

At around the time of this copy, the stock traded near its 52-week low price at Rs 2,471.8, down as much as 2.8 per cent.

The sharp decline in the company's stock price comes after its weaker-than-expected September earnings and demand slowdown.

Brokerages downgrade Asian Paints stock

InCred Equities in its report advised a 'reduce' call on the stock with a target of Rs 2,340 per share, implying a downside of over 5 per cent from today's low levels. The brokerage held that decorative paint demand remained weak in 2QFY25 (for both Asian Paints & the industry), with a weaker mix and higher rebating intensity impacting margins (gross/EBITDA margins contracted 260bp/480bp yoy to 40.8 per cent/15.4 per cent, respectively). During the quarter, Asian Paints witnessed raw material inflation of 1.5 per cent, for which it hiked product prices by 1.2 per cent, however demand conditions are expected to remain challenging, which, coupled with heightened competitive intensity, should limit the potential for upside in margins for paint players in the near term.

We cut our FY25F/26F EPS by 16%/12%, respectively, and maintain our REDUCE rating on the stock with a new target price of Rs2,340 (45x Sep 2027F EPS) from Rs2,620 earlier, it added.

Upside risk for the stock as underscored by the brokerage is stronger-than-expected sales growth.

Jefferies meanwhile held the most bearish view on the stock with a target of Rs 2,100, meaning a downside of over 24 per cent. The company logged a significant miss in 2Q, with a line by line miss across P&L heads. A mild volume decline, more than 500bp Ebitda margin decline resulted in pre-ex earning decline of 31 per cent YoY, it added.

The management blamed weak consumer sentiment & seasonality but presented a positive H2 view.

Outlook remains mixed

Going ahead, the outlook for the company remains better amid declining input cost as well as better demand outlook. Also, the company's management maintained its outlook of double-digit volume growth for FY25F. Margin is expected to remain under pressure due to competitive intensity

Asian Paints Q2 results

Asian Paints posted a 6.5 per cent yoy sales decline in its decorative business in 2QFY25, with a 0.5 per cent volume decline, indicating a price cut of 6 per cent (vs. a 9.9% cut in 1QFY25). Weak consumer sentiment impacted demand in 2Q, further affected by extended monsoons, which, coupled with price cuts taken in the base and a weak mix, led to sales decline. Urban markets remained under stress while rural markets gained on account of improvement in the distribution reach & assortment. The pace of growth of the project business slowed down. The industrial business fared relatively better. International business declined by 1% yoy (+8.7% on a constant currency basis) impacted by weak performance in Africa and a decline in Bangladesh, which led Asia to decline by 1 per cent yoy. Forex loss in Ethiopia, along with subdued demand in Asia, impacted profitability.