Tag: Asian Paints

Asian Paints outlook appears optimistic but why are brokerages sounding the alarm bell

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian Paints, stumbled in its recent quarterly performance, causing its stock to take a 5% hit on Wednesday, May 9. Despite a respectable 10% uptick in volume, the company fell short of expectations across the board, leaving investors and analysts uneasy.

A day after its earnings, the stock gained and was trading 2.3% higher at ₹2,772.50 apiece at 10 am on Thursday, May 10.

As we look ahead to fiscal year 2025, the company’s outlook appears cautiously optimistic, with projected double-digit volume growth for both the first quarter and the year overall.

However, there are clouds on the horizon, including an anticipated 5-6% gap between volume and value, along with a margin range of 18-20%.

With the stock down 25% from its peak, brokerage firms are sounding the alarm bells, particularly with the looming threat of Birla Opus, a major disruptor yet to reach its full potential.

Analysts are urging caution when it comes to Asian Paints, with many suggesting adjustments to their target multiples.

Jefferies, points out the lofty valuations of Asian Paints, sitting at around 50 times earnings. They see increased competition as a wildcard, leading them to dial back earnings estimates and set a new target price of ₹2,200.

Citi’s sell recommendation reflects concerns over declining revenues, attributed to price cuts and a shift towards lower-priced products. With a target price of ₹2,600 per share, Citi highlights the challenges Asian Paints faces in maintaining its market position.

ISEC believes the competitive balance in the paint industry has been disrupted. They foresee a drop in EBITDA margin over the next fiscal years, prompting them to advise a reduction in holdings, with a target price of ₹2450.

Phillip Capital has trimmed EPS estimates for fiscal years 2025-26. With a revised target price of ₹2,950 from ₹3,200, Phillip Capital aims for a more conservative valuation, considering the company’s historical performance and market conditions.

In conclusion, Asian Paints is navigating choppy waters, grappling with a mix of internal and external challenges. While the company’s long-term growth story remains intact, the immediate future is uncertain. Investors are urged to proceed with caution, weighing the recommendations of analysts against the evolving landscape of the paint industry.

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Asian Paints Dividend: Paint maker announces its highest payout in over a decade

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian Paints Ltd. recommended a final dividend of ₹28.15 per share along with its March quarter results on Thursday.

This is the highest payout that the company has announced in over a decade. In June 2013, the company had announced a final dividend of ₹36.5 per share.

Together with the interim dividend of ₹5.15 per share, the total dividend for the financial year 2024 stood at ₹33.3 per share.

For financial year 2023, the company had declared a final dividend of ₹21.25 per share, along with an interim dividend of ₹4.4 per share.

Record date for the dividend has been fixed as June 11, 2024. The dividend, if approved by shareholders, will be paid on or after June 27, 2024, the company said.

Asian Paints reported its March quarter results which were a miss on most fronts. It attributed the revenue decline to weak demand conditions and the shift of consumers to cheaper alternatives.

Volumes for the quarter stood at 10%, which is at the higher end of the 8% to 10% projection of a CNBC-TV18 poll.

Shares of Asian Paints are trading 3.5% lower post the earnings announcement at ₹2,742 and is among the top losers on the Nifty 50 index after Larsen & Toubro.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian Paints Q4 Results: Weak demand, downtrading hurts revenue; Volume growth of 10%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian Paints Ltd., the largest paints company in India reported a volume growth of 10% for its decorative business. This was the upper end of the CNBC-TV18 poll estimate of 8% to 10% growth. However, the stock declined as much as 4% as most of the other parameters were a miss compared to estimates.

Revenue for the quarter stood at ₹8,731 crore, which was a decline of 0.6% compared to the year-ago quarter. The figure was also lower compared to the estimate of ₹9,050 crore.

The company attributed the decline in revenue to weak demand conditions and downtrading seen in the premium segment. Downtrading essentially refers to a customer switching from expensive to more cheaper alternatives.

However, MD & CEO Amit Syngle said that the company is confident of a pick up in demand conditions with a favourable monsoon forecast.

Net profit for the quarter stood at ₹1,275 crore, which was also lower than the CNBC-TV18 poll of ₹1,370 crore.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter also missed the ₹1,950 crore estimate, coming in at ₹1,692 crore. On a year-on-year basis, Asian Paints reported a 9.3% drop in its EBITDA.

EBITDA margin narrowed by 170 basis points during the quarter to 19.4%, well below the 21.5% estimate.

Shares of Asian Paints are trading 3.5% lower at ₹2,742.55. The stock is down nearly 20% so far in 2024.

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Storyboard18 | Neo Bharat Latex paint comes in as a big innovation in technology, says Asian Paints

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian Paints, India’s foremost paint and decor company, earlier this week, launched its Neo Bharat Latex Paint business. The company is venturing into a new category of paint as robust growth in the sector driven by increasing urbanisation, rising disposable incomes has encouraged existing players to tap into the booming demand and lap in more market share.

The Neo Bharat Latex Paint boasts a special polymer technology that delivers unmatched finish, increased coverage, and enhanced washability.

Branded as “Colours of Progress,” Neo Bharat Latex Paint is poised to revolutionise the category, embodying Asian Paints’ dedication to innovation and excellence. It aims to broaden its presence in the ever-evolving industry and make it more accessible to all.

The company has also onboarded cricketer Virat Kohli as its brand ambassador for the new launch. This will be the company’s mass market offering with an aim of penetrating into the unorganised segment with a branded solution.

Storyboard18’s Shibani Gharat spoke with Asian Paints’ Managing Director and Chief Executive Officer Amit Syngle about going beyond four walls and learnings from entering the home décor space.

“Virat Kohli is someone who has got a lot of accomplishments and a trust. That connect is something which we wanted to use in terms of looking at Neo Bharat coming and people appropriating this brand with Virat and progressive India,” he said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stocks to Watch: Mahindra & Mahindra, NLC India, Asian Paints, UPL, Prestige Estates and more

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Paints stocks extend fall amid concerns of margin pressure after Birla’s foray

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The entry of Grasim Industries to the oligopolistic paints market has triggered selloff in stocks of incumbent players. The combined market capitalisation of seven paints stocks has eroded as much as ₹25,000 crore, ever since the Aditya Birla owned company launched its brand–Birla Opus. 

While the largest player, Asian Paints witnessed the biggest drop in market capitalisation, other companies like Kansai Nerolac Paints and Akzo Nobel India saw their market valuation fall by ₹1,285 crore and ₹919 crore, respectively, since February 2022. The market valuation of Asian Paints has come off ₹21,395 crore to ₹2.68 lakh crore.

Shares of Shalimar Paints plummeted as much as 12.1% in four sessions, while Asian Paints, Akzo Nobel India and Sirca Paints lost 7-8%. The benchmark Nifty50 slid 1.2% during the same period.  

Market participants are of the view that the aggressive expansion plans of Grasim Industries could negatively impact margins of existing players. JP Morgan opined that the accelerated national scale-up could drive pressure on operating margins of incumbents in FY25E, as they would likely step up their channel incentives and brand spends. This could happen even as on ground execution and consumer acceptance of the Birla Opus brand remains a key monitorable over the coming quarters. “Hence Asian Paints’ share price performance may stay subdued amidst earnings downside risk despite moderation in stock valuations,” JP Morgan wrote in an investor note.

The paint business of Aditya Birla group is aspired to be ₹10,000 crore and expected to be profitable in the third year of operations. Further, the management sounded more optimistic on delivering better margins compared to existing players, aided by a more efficient cost structure, scale benefits, reasonable realistions and premium mix.

According to JP Morgan, there has been aggressive network expansion from the incumbents over the past few quarters and the channel or brand investments could further accelerate for paints companies on account of Birla Opus’s dealer addition and advertising spends (Birla to match the leaders). “Even as benign raw material costs could provide some support to the gross margin, we expect the industry margins to moderate in-line with the guidance of the paints companies.” The brokerage is now guiding 18-20% margins for Asian Paints, against 22% clocked in 9MFY24. Similarly, the margin guidance for Berger Paints narrowed to 15-17%. In comparison, the margins for 9MFY24 stood at 17.4%.

Shares of Grasim Industries have surged 23% over the last six months, against 14% gains clocked by the benchmark Nifty50 during the same period.

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Asian Paints gets a downgrade, lowest price target post Birla Opus launch

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian Paints Ltd., the leader in India’s paints sector has received a downgrade from brokerage firm CLSA citing increasing competitive intensity post Grasim’s “Birla Opus” launch last week. CLSA has downgraded the stock to “sell” from its earlier “buy” rating.

CLSA has also cut its price target on Asian Paints to ₹2,425 from ₹3,215 earlier. The revised price target implies a potential downside of 19% from Friday’s closing levels. This is also the lowest price target on the street for the paints giant.

The brokerage believes that while Asian Paints is likely to emerge as the leader post the paints market shake up, it will not be a “shoo-in” or absolutely certain that it will happen so.

CLSA is also anticipating a de-rating to take place for Asian Paints and a move back to its 15-year average multiple. As a result, it has cut its financial year 2025 – 2026 earnings estimates by 8% and 10% respectively.

Aditya Birla Group’s Grasim Industries launched its paints business last week, three years after announcing a foray into the sector with a ₹10,000 crore war chest. Chairman Kumar Mangalam Birla has set a target for the paints business to reach profitability and cross ₹10,000 crore in revenue in the next three years. You can read more on that here.

In response, while Goldman Sachs has not downgraded Asian Paints, maintaining its “neutral” rating it has cut its price target on the stock to ₹2,850 from ₹3,300 earlier.

The brokerage though, has cut its Earnings Per Share (EPS) estimate for Asian Paints for financial year 2025 and 2026 by 5.2% and 10.9% respectively, citing that Birla’s paint entry strategy was way more comprehensive than earlier assumed.

However, brokerage firm Macquarie has maintained its “outperform” recommendation on Asian Paints with a price target of ₹4,000. It believes that despite the new launch, discounting levels will not rise sharply for the industry and that it prefers Asian Paints over Berger, which would be relatively more affected by the new entrants.

Citi is confident of Grasim’s ability to achieve the vision of becoming the No. 2 player as they have developed differentiated products compared to competition. The company also has a clear dealer pull plan in place. It has maintained its “buy” rating on Grasim with a price target of ₹2,650.

Out of the 37 analysts that have coverage on Asian Paints, 16 of them now have a “sell” or equivalent rating on the stock. 12 analysts have a “hold” call, while the remaining nine have a “buy” rating.

Shares of Asian Paints have risen 8.5% over the last 12 months.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian Paints targets ₹1 lakh crore revenue over the next decade with product expansion

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mumbai-based Asian Paints aims to become a ₹1 lakh crore revenue company in the next decade, said MD and CEO Amit Syngle. In an exclusive conversation with CNBC-TV18, Syngle spoke about growth outlook and opportunities for the company.

Syngle said the strategy is to offer almost everything that goes into a home. “We’ve got into lighting, we’ve got into UPVC (unplasticized polyvinyl chloride) doors and windows, we’ve got into wooden flooring, kitchen and bath is already with us. We’ve gotten to fabrics and furnishings. And, therefore, as we go ahead, we are always on the lookout in terms of saying that is there something which really synergizes in terms of our strategy in terms of making it big to that extent,” he said.

The goal is to increase the mind share of the brand and look at influencing not just the bottom of the pyramid but even the luxury space, which has immense growth potential with rising disposable incomes, he noted.

Syngle’s plan is to keep the margin within the 18-20% band and invest the rest in brand building.

He identified services as a key area where most paint companies currently lag, and Asian Paints’ plan to become an outlier in that space. Services involves providing end-to-end painting solutions with expert consultations. “Our endeavour is that the service brand should become 10% of the overall revenue of Asian paints as we go ahead.”

Also Read | Asian Paints shares may not rise more from current levels, say analysts as competition rises

Within the paints business, the industrial paints category is expected to grow to 7-8% of the business from 4-5% now.

The company is also focusing on backward integration for growth and 12% of the total revenues currently come from new and innovative products.

Asian Paints holds the top position in India’s paint industry in terms of market share. It serves as the parent company for Berger International. The company’s manufacturing footprint spans across 15 countries globally, with significant operations in India, the Indian subcontinent, and the Middle East.

For the December quarter, Q3FY24, Asian Paints reported domestic volume growth of 12% compared to the same quarter last year. The company said that growth was supported by an extended festive season, although there was some moderation in demand for the latter part of the quarter.

Also Read | Asian Paints CEO says doubtful if competition could even get Rs 5,000 crore sales in three years

For the quarter, Asian Paints reported a net profit of ₹1,475 crore, compared to a CNBC-TV18 poll of ₹1,410 crore. On a year-on-year basis, the net profit was up by 34.5%.

Revenue for the period stood at ₹9,104 crore, which was marginally lower than the CNBC-TV18 poll of ₹9,285 crore. Asian Paints reported a 5.4% topline growth during the quarter compared to the same period last year.

Over the past year, Asian Paints’ shares have surged by over 4% and have a market capitalisation of ₹2,81,438.22 crore.

For more details, watch the accompanying video

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Asian Paints CEO says doubtful if competition could even get ₹5,000 crore sales in three years

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian Paints MD & CEO Amit Syngle told CNBC-TV18 in a post earnings interaction that competition from other players has not been able to make a significant dent in their business so far.

Syngle also mentioned that he does not see competition getting to even ₹5,000 crore worth of sales in the next three years, in an industry, which is worth ₹80,000 crore.

“I can tell you only one thing, if you are evaluating in terms of what’s going to happen, please see that it is 80,000 crore industry any new competition comes in, if they can do even 5,000 crore in three years I think it will be a wonder,” he said.

The foray of Aditya Birla Group’s Grasim and JSW into the paints business has been keeping analysts on the sidelines for turning bullish on Asian Paints. They have been highlighting that rising competition will maintain the pressure on Asian Paints, which is currently the market leader in the Indian paints industry.

“Even the larger competitor which the street is expecting has come and launch certain categories already in terms of that. Even this year, we are not seeing that there is something which has kind of affected us in terms of either growth or in terms of the margin. in fact, margins have only gone up in terms of the overall trajectory,” Syngle said.

For the December quarter, Asian Paints reported domestic volume growth of 12% compared to the same quarter last year. The company said that growth was supported by an extended festive season, although there was some moderation in demand for the latter part of the quarter. Syngle attributed the growth to both premium and economy segments.

The Asian Paints MD & CEO mentioned that the volume growth for December stood between 8% and 9% but there were still green shoots of demand, adding that he is confident of double-digit volume growth for the company in the March quarter as well.

Although Asian Paints reported a jump in its EBITDA margin, which was also higher than CNBC-TV18 estimates, Syngle held the company’s margin guidance between 18% and 20% due to the geopolitical uncertainties. He also plans on reinvesting some of the gross margin savings into marketing and distribution spends.

Asian Paints gross margins improved by 500 basis points over the same quarter last year to 43.6% and Syngle expects these levels to sustain going forward.

Global brokerages Jefferies and CLSA have issued an ‘Underperform’ rating on the stock while HSBC issued a ‘Buy’ rating with a target price of ₹4,020 a share. HSBC sees fear of price-based competition exaggerated apart from a strong growth outlook.

15 out of the 37 analysts that track Asian Paints have a “sell” recommendation on the stock, while nine of them have a “buy” rating.

Shares of Asian Paints are trading 2% lower at ₹3,176. The stock has gained 8% over the last 12 months.

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Asian Paints shares may not rise more from current levels, say analysts as competition rises

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The topline performance of India’s largest paints manufacturing company, Asian Paints Ltd., was underwhelming in the December quarter. The company missed forecasts due to lower-than-expected revenue despite a delayed festival. Revenue, up 5.4% year-on-year; slightly missed analysts’ estimate due to a price cut of 1.3%.

Asian Paints reported a domestic volume growth of 12% on-year in the third quarter characterised by double-digit expansion in both rural and urban markets. The company said that growth was supported by an extended festive season, although there was some moderation in demand for the latter part of the quarter.

The company clocked a gross margin of 43.6%, the best in the last 11 quarters. According to analysts, the gross margin in FY25 and FY26 will be the key monitorable, considering the changing competitive landscape and dwindling raw material price benefits.

At 28%, EBITDA reported a beat led by a higher-than-expected gross margin improvement. Asian Paints achieved a 22% EBITDA margin in the first nine months of FY24. However, management reiterated its EBITDA margin guidance of 18-20% in the medium term.

Here’s what brokerages say on the paint stock:

Global brokerages Jefferies and CLSA have issued an ‘Underperform’ rating on the stock while HSBC issued a ‘Buy’ rating with a target price of ₹4,020 a share. HSBC sees fear of price-based competition exaggerated apart from a strong growth outlook.

Motilal Oswal: The domestic broking firm remains cautious as it believes the paints segment will not enjoy higher multiples of the past. “It is important to note that the re-rating of the stock was a significant factor driving the appreciation of Asian Paints’ stock price over the past five to six years, as the earnings CAGR has been in the 12-14% range,” Motilal said.

The brokerage believes valuations are expensive considering the uncertain competitive pressure. It reiterated its ‘Neutral’ rating with a target price of ₹3,340 per share.

Kotak remains cautious, given the deceleration in underlying demand and potential impact of Grasim’s launch on industry profitability, likely resulting in negligible FY2024-26E EPS CAGR. It revised its fair value to ₹3,100 from ₹3,050 per share earlier.

Nuvama remains positive on Asian Paints due to high entry barriers and its best-in-class R&D. “Rolling over to Q3FY26E yields an increased target price of ₹3,790 from ₹3,650 earlier,” it said while retaining a ‘Buy’ rating on the counter.

Out of the 37 analysts that track Asian Paints, nine continue to have a ‘Buy’ recommendation on the stock, 13 say ‘Hold’, while 15 of them have a ‘Sell’ rating.

The stock was trading 4% lower on Thursday post its earnings. Asian Paints shares have gained nearly 7% in the last one year while it has tumbled 7.38% since the beginning of this year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow