Asian Paints shares fall over 4% after weak Q1 results; Citi sees over 19% downside

Asian Paints shares in Thursday’s session (July 18) fell over 4 per cent at day's low to Rs 2848.15 in early trade after the company announced its Q1FY25 results on the previous day. For the April-June quarter, the company’s consolidated net profit declined 24.6 per cent to Rs 1,186.79 crore on the back of demand slowdown due to severe heatwave and general elections. 

Zee Business research desk estimated net profit to decline 10 per cent on-year and come in at Rs 1,411 crore. In Q1FY24, the company reported net profit of Rs 1,575 crore.

Consolidated revenue from operations in the first quarter of the current fiscal was down at Rs 8,969.73 crore as compared to Rs 9,182.31 crore in the year-ago period, the company said in its regulatory filing. 

Ahead of its results on Wednesday, the stock of Asian Paints ended 0.61 per cent higher at Rs 2,974.4 per share on the BSE.

Margins at the country’s leading paints maker contracted sharply from 23.1 per cent during Q1FY24 to 18.9 per cent in the reporting quarter. The desk, however, estimated gross margins to likely only marginally in the June-ended quarter.

Volume growth during the review period was recorded at 7 per cent as against estimates of 8-10 per cent. 

“Despite delivering a good volume growth of 7 per cent in the decorative segment, aided by some movement in rural markets, the company's value declined 3 per cent due to the price decrease taken earlier in the year and shift in product mix,” said Asian Paints- Managing Director & CEO Amit Syngle.

Here's how global brokerages rate the stock post its Q1 show:

Hong Kong-based global brokerage CLSA slashed the target on the stock to Rs 2,290 while maintaining an 'underperform' rating on the counter. The brokerage said it expects heightened competitive activity to keep sales/margins in check. Further, price transmission will likely depend on competitive activity. 

Goldman Sachs continued with its neutral rating on the stock and slashed the target price to Rs 2,750. The brokerage held that the company logged a sharp slowdown during Q1, nonetheless, the management expects a modest recovery ahead.