The stock fell over 3% on Thursday following the announcement of its Q2FY24 earnings during the market hours.
Asian Paints on Thursday reported a 53.3% year-on-year (YoY) rise in consolidated net profit for the quarter ended September 2023 at Rs 1,232.4 crore. The profit was below the ET Now Poll estimate of Rs 1271 crore. Consolidated revenue from operations increased just 0.2% YoY to Rs 8,478.6 crore and was lower than the estimated Rs 8,970 crore.
Here is what brokerages recommended on Asian Paints’ stock:
HSBC: Buy | Target: Rs 4,000
HSBC has a buy view on Asian Paints stock with a price target of Rs 4,000. The Q2FY24 earnings trailed expectations with 6% decorative volume growth in part driven by uneven monsoons impacting the volumes, this brokerage said. H2FY24 outlook remains strong and valuation looks appealing, it said, adding that the volume growth rebound is expected in Q3. Margin expansion fuelled strong earnings growth, and remains on an upward trajectory.
Motilal Oswal: Neutral | Target: Rs 3,100
Motilal Oswal reiterated a ‘Neutral’ rating on the stock with a target price of Rs 3,100 premised at 50xFY25E EPS.
“Changes to our model have resulted in a 3.1%/0.6% decline in our EPS forecast for FY24/FY25. The management highlighted the adverse impact of erratic rainfall on demand. Additionally, with input costs on the rise, the margin gains in 2HFY24 are not expected to mirror those seen in 1HFY24,” the brokerage said in a note.The entry of new players with deep pockets and massive commitments to investments could trigger an overall shift in demand and margin structure due to heightened competition, the brokerage noted. It said that it will remain cautious as the paints segment may not enjoy higher multiples of the past.
Nuvama: Buy | Target: 3,505
Nuvama has maintained a buy on the counter but slashed the target price from an earlier Rs 4,045 to Rs 3,505. “Factoring in a decent Q2FY24, we cut FY25E/26E EPS by 5.5%/5.6% and reduce our multiple from 60x to 55x yielding a revised target price of Rs 3,505,” Nuvama said. Spike in raw material prices and geo-political issues remain key risks for the company’s growth prospects in Nuvama’s view. The rural economy, not fully recovered yet, is another potential risk, it said.
Nuvama called Asian Paints’ Q2 earnings decent with consolidated revenue/EBITDA in line with its estimate but undershooting consensus.
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