Moreover, stances taken by a couple of top domestic brokerages did not cheer investors. While Kotak Institutional Equities recommended a ‘Reduce’ rating, Motilal Oswal reiterated a ‘Neutral’ view. Nuvama chose to remain upbeat with a buy recommendation.
Asian Paints on Wednesday reported a 35% year-on-year (YoY) rise in consolidated net profit for the quarter ended December to Rs 1,448 crore. This was higher than the ETNow poll of Rs 1,353 crore. Consolidated revenue from operations grew by 5.4% YoY to Rs 9,103 crore but trailed estimates of Rs 9,356 crore.
Read More: Asian Paints Q3 Results: Cons PAT rises 35% YoY to Rs 1,448 crore, beats estimates
Here’s what brokerages recommended:
Kotak Equities: Reduce | Target: Rs 5,500
Asian Paints’ 5.5% value growth in domestic decorative paints is weak in the context of the late festive season, Kotak said, even as it pointed to profitability remaining marginally ahead of its expectations and at the pre-pandemic peak. “We remain 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,” this brokerage said. It rolled over and revised the fair value to Rs 3,100, valuing the stock at 50X FY2026E P/E.
Motilal Oswal: Neutral | Target: Rs 3,340
Motilal believes the stock’s valuations to be expensive at 53xFY25E EPS and 48xFY26E EPS considering the uncertain competitive pressure. It reiterates its ‘Neutral’ rating with a target price of Rs 3,340 based on 50x December 2025E EPS.
The revenue growth in the said quarter was supported by an extended festive season though it was sluggish due to price reductions and unfavorable mix, the brokerage said. Benign raw material prices continue to drive gross margin with EBITDA reporting a beat led by a higher-than-expected gross margin improvement, the Motilal note said.
Nuvama: Buy | Target: Rs 7,000
Asian Paints (APL) reported decent Q3FY24 numbers with EBITDA and PAT beating Nuvama’s estimates while volume growth marginally ahead of the estimate. However, revenue saw a slight miss due to a price cut. 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 Rs 3,790 from an earlier Rs 3,650, our forecast remains unchanged,” Nuvama said while retaining its buy view.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
