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Asian Paints shares fell over 9% on November 11 after several brokerages expressed disappointment over Q2 results
Asian Paints Share Price
Asian Paints shares fell over 9 per cent on November 11 after several brokerages expressed disappointment over the company’s underwhelming Q2FY25 performance amid a challenging demand environment and increased competition.
The stock has tumbled over 26 per cent from its peak of Rs 3,395 registered on September 19, 2024 and at present trades at 3-year lows.
On the earnings front, Asian Paints consolidated net sales decreased by 5.3 per cent year-on-year (YoY) to Rs 8,003.0 crore in Q2FY25. EBITDA was down 27.8 per cent YoY to Rs 1,239.5 crore from Rs 1,716.2 crore. Profit after tax declined by 42.4 per cent YoY to Rs 694.60 crore.
Technically, a fall of more than 20 percent from its peak generally indicates a change in trend from positive to negative. Traders perceive a fall of more than 20 percent in a stock or an index as a bear market.
With today’s fall, Asian Paints has given a downside breakout (super trend line) on the long-term charts for the first time since May 2018. The stock was seen trading above the monthly super trend line until last month.
The long-term (monthly) chart shows that Asian Paints has rallied nearly 193 per cent from levels of Rs 1,1,60 in May 2018, post the breakout above the monthly super trend line to its recent summit in September.
The downside breakout, now, suggests that the stock could witness a tepid trend with limited upside going ahead. Further, Asian Paints is seen trading below 20- and 50-MMA (Monthly Moving Average). This suggests at likely stiff resistance around Rs 2,930 – Rs 3,030 range.
In the near term, the bias is likely to remain bearish as long as the stock trades below Rs 2,750. On the downside, the stock seems on course to test its 100-MMA support at Rs 2,125. Interim support for the stock can be expected around Rs 2,315, a level last seen three years ago.
What Should Investors Do Now?
JP Morgan has downgraded the stock to underweight and cut the target price to Rs 2,400.
Q2 was significantly weaker than expectations as revenue/EBITDA was 6 per cent/20 per cent below consensus. Asian Paints is lagging its peers with differential expanding further in Q2 both on the revenue and earnings front. JP Morgan has lowered the FY25-27E EPS by 10-12 per cent.
CLSA maintained an ‘Underperform’ rating with a target of Rs 2,290, citing weaker consumer sentiment that led to sales growth lagging competitors.
Nomura lowered the target price of the stock to Rs 2,500 from Rs 2,850 and gave it a ‘Neutral’ rating. “Other players consciously bettered their mix by selling less of low-value products (putty, distemper, primer etc), while Asian Paints continued to see lower mix. While we believe volumes can improve in 2H due to postponement of demand and improvement in rural, we believe overall sales and EBITDA will still look anaemic/flattish,” the brokerage said.
Morgan Stanley and Jefferies also held cautious views, with ‘Underweight’ and ‘Underperform’ ratings respectively. Morgan Stanley cited weather-related impacts and demand challenges, while Jefferies expressed concerns about Asian Paints’ broad-based underperformance and competitive pressures.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
