Asian Paints share price target cut by multiple analysts citing margin concerns, competition

Multiple analysts covering Asian Paints Ltd., India's largest paints company, have cut their price target on the stock after its September quarter results, that were reported during market hours on Thursday.

37 analysts currently have coverage on Asian Paints, of which 20 have a "buy" rating, 10 say "hold", and seven others have a "sell" rating on the stock.

Asian Paints Shares Are A Buy Or Sell?

Global investment banking firm HSBC has maintained its "hold" rating on Asian Paints but has cut its price target to ₹2,420 from ₹2,650 earlier.

The firm wrote that profitability during the quarter was weak due to the inferior mix, seasonality and destocking, and while the underlying trends may be better, they are not encouraging.

Competition and elevated cost inflation are impending Asian Paints' margin recovery, according to HSBC, who appreciated the company's rising focus on premiumization. However, it has highlighted industry growth and dynamics as a continued point of concern.

CLSA continues to have an "underperform" rating on Asian Paints with a price target of ₹1,925. It is the lowest target on the street for the stock.

Asian Paints' consolidated gross margin contraction missed expectations as the entire material cost increase was not passed on to customers.

CLSA also said that Asian Paints is unlikely to pass on the full cost increase as competitive intensity remains elevated and to maintain affordability as well. It did highlight the management's reiteration of maintaining its volume growth guidance of 8% to 10% for the year.

Jefferies has maintained its "buy" rating on Asian Paints, but has cut its price target on the stock to ₹3,025 from ₹3,350 earlier.

A shift in festive season partially impacted volume growth during the quarter, but Jefferies expects that to improve during the ongoing quarter, even as competition remains intense.

Better product mix, festive demand, calibrated price hikes are all factors that underpin a margin improvement during the second half of the financial year, although the raw material cost volatility remains a key risk.

Backward integration will help margins in the medium-term.

Morgan Stanley also remains "underweight" on the stock and has cut its price target to ₹2,158 from ₹2,382 earlier.

Shares of Asian Paints are trading at the lows of the day, currently down 0.8% at ₹2,283.7. The stock is down 17% so far this year.