Asian Paints inventory value right now: Asian Paints inventory: Delicate Q2 leaves buyers upset. Do you have to promote?

NEW DELHI: After reported a tender Q2 September quarter earnings, buyers had been left upset with lower-than-expected progress in income and margin pangs. The constant compounder inventory, which has been below strain in the previous couple of months amid a spike in crude oil charges and entry of latest gamers, fell nearly 2% to hit day’s low at Rs 3,080.05 on BSE on Friday.

“Outcomes had been properly beneath estimates as realizations and gross margins had been severely impacted, primarily led by product combine deterioration brought on by (a) slower progress in excessive margin city gross sales in contrast to the previous couple of quarters and (b) the adversarial affect of downtrading,” home brokerage

mentioned.

Stating that the present valuations (~53.6x FY24E P/E) absolutely seize the upside over the following one yr, it has reiterated impartial ranking on the “costly” inventory.

Within the final 5 years, the inventory has delivered 11.6% earnings CAGR, whereas the inventory value has delivered 24.1% CAGR, implying a major re-rating.

The Nifty firm additionally introduced a capex of Rs 6,750 crore over the following 3-4 years with the first goal of turning into a extra cost-efficient producer that enables it flexibility to cost extra competitively. Analysts mentioned the corporate administration’s message is obvious—prioritize market share positive aspects/protection over margins and return ratios.

Taking a cautious stance on the ornamental paints business amid rising competitors, Kotak Institutional Equities has a scale back ranking on the inventory. “We tweak revenues, average our GM assumptions and broadly keep EPS estimates. We roll over and retain FV of Rs2,950 (implies 51X December 2024E PE),” it mentioned.

International brokerage agency CLSA additionally has an underperform ranking on Asian Paints after the quarterly numbers with a goal value of Rs 3,425.

“The corporate is trying to lengthen its aggressive edge. The present valuation asks for wholesome progress, however there may be margin strain from a weak gross sales combine and high-cost stock,” CLSA mentioned.

mentioned the 60x one-year ahead P/E ratio leaves no room for error and forecasts are already pretty optimistic. The brokerage has a goal value of Rs 3,505 on the inventory with a maintain ranking.

Describing the capex plan as a masterstroke from an astute market chief to tackle new gamers attempting to place a foot within the door, it mentioned the capex dedication appears to be like massive however is lower than two years’ working cashflows for Asian Paints.

Securities, nonetheless, disagrees saying that whereas helpful in the long term, the capex will definitely be a drain on free money circulate and returns profile within the quick to medium time period. The brokerage has a promote ranking on Asian Paints with a goal value of Rs 2,700 per share, implying a draw back of over 13%.

Sharekhan and Axis Securities stay bulls. “Market share positive aspects, distribution enlargement, and sustained modern product additions will assist the corporate to attain constant quantity progress and keep its management place within the paints enterprise,” mentioned Sharekhan, which has a goal value of Rs 3,689 on the inventory.

(Disclaimer: Suggestions, options, views and opinions given by the consultants are their very own. These don’t signify the views of Financial Instances)