Analysts Raise Targets On Asian Paints After Q3 But Stay Cautious Over Margin

Analysts raised price targets on Asian Paints Ltd. after third quarter but remained cautious over its margin.

India’s largest paintmaker saw a 62% year-on-year jump in net profit at Rs 1,265.3 crore in the October-December period. Its revenue rose 25% while margin expanded to 26.3% from 21.9% a year ago. The company reported its highest-ever revenue, profit and Ebitda during the quarter.

The company’s domestic decorative business posted volume growth of more than 30%, led by premium and luxury portfolios.

“The recovery was supported by new construction and renovation as well as robust festive demand,” Amit Syngle, managing director and chief executive officer at Asian Paints, said during a conference call after the third-quarter results. “Strong growth in paints segment due to continued growth in tier 2, 3 and 4 and rebound in demand from tier 1 cities… The quarter witnessed strong growth projects and large institutional sales.”

Syngle also said raw material inflation is on an upswing with crude prices going up, but the company needs to see if costs sustain at these higher levels before deciding on any price change.

Still, analysts expect the company’s margin to face pressure amid rising crude and other input costs. Of the 39 analysts tracking the stock, 16 recommend a ‘buy’, 10 have a ‘hold’ rating and 13 suggest a ‘sell’. The stock is trading 6.2% higher than its 12-month Bloomberg consensus price target of Rs 2,507.

Shares of Asian Paints fell as much as 2.5% to Rs 2,648.

Here’s what the analysts have to say...