Asian Paints sees worst fall in over 2.5 years; tumbles 9.5% post weak Q2 show

Asian Paints in early trade on Monday post a weaker-than-expected Q2 show fall up to 9.5 per cent to the day's low price of Rs 2,507 per share. The weak performance primarily of the company during the September quarter primarily led to the steep fall in its share price.

The company last recorded such steep fall over 2.5 years back on May 25, 2022 of over 8 per cent. 

At the last count at around 10:04 am, shares of Asian Paints traded weak by over 8 per cent or Rs 226 points at Rs 2,543.30 per share on the BSE.

For the reporting quarter, as against other industry players, Asian Paints logged the highest decline in revenue growth of over 5 per cent on the back of mix shift as well as a price cut taken in the previous year.

Further, in the industrial segment, the company logged a single-digit value growth. 

Also, the company has seen an impact on margin during the September quarter amid higher input costs as well as higher sales expenses.

Asian Paints outlook 

As per the research inputs, the company held that going ahead too it will face demand related challenges. Nevertheless, going into Q3, the company will benefit on the back of reduction in input costs as well as price hike.

Also, the company stressed that it would keep macroeconomic challenges in Ethiopia, Egypt and Bangladesh. 

Paint Companies Revenue Growth in Q2

Asian Paints            -5.3%
Kansai Nerolac         -0.3%
Berger Paints          +0.3%
Akzo Nobel              +3%
Indigo Paints           +7.4%

Should you buy Asian Paints post weak Q2 show?

Jefferies holds 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.

Meanwhile, JP Morgan downgraded the stock to 'underweight' from the earlier 'neutral' call as the target has been slashed lower to Rs 2,400 per share. The brokerage highlighted that revenue/EBITDA was 6 per cent/20 per cent below consensus. The company is lagging peers with differential expanding further in Q2 both on revenue & earnings front.

JP Morgan has lowered its FY25-27E EPS by 10-12 per cent.