Asian Paints Gets A Thumbs-Up From Analysts On Better-Than-Expected Recovery
A customer looks at paint samples at a store. (Photographer: Victor J. Blue/Bloomberg)

Asian Paints Gets A Thumbs-Up From Analysts On Better-Than-Expected Recovery

Most analysts maintained their bullish stance on Asian Paints Ltd. as a revival in demand after India eased lockdown curbs, benign raw material prices and cost cuts offset some of disruptions caused by the coronavirus pandemic during the quarter ended June.

Net profit of India’s biggest paintmaker declined 67% year-on-year to Rs 218.5 crore in the April-June period, according to an exchange filing. That beat the Rs 91-crore consensus estimate of analysts tracked by Bloomberg. Its revenue fell 43% to Rs 2,923 crore.

The company’s operating margin contracted to 16.5% from 22.7% a year ago, better than the 13.5% estimated. Its operating profit fell 58% to Rs 484 crore.

After a “complete washout in April” due to an extended lockdown, the decorative business segment witnessed improving business conditions over the next two months, Amit Syngle, managing director and chief executive officer at Asian Paints, said in a statement accompanying the results. “While the quarter ended in a negative territory, the business registered a healthy double-digit volume growth in June to end the quarter on a promising note.”

Asian Paints in June had also witnessed demand recover in rural areas and smaller cities.

While that may have prompted analysts to remain bullish on the company, its high valuation caps the upside.

Of 39 analysts tracking the stock, 22 have a ‘buy’ recommendation, nine suggest a ‘hold’ and eight have a ‘sell’ rating. The average of 12-month Bloomberg consensus price target implies an upside of 3.4%.

Also read: Asian Paints Q1 Results: Profit Falls 67% After ‘Washout’ April

Here’s what brokerages have to say about Asian Paints’ first-quarter results:


  • Maintains ‘overweight’ with a price target of Rs 1,900 apiece
  • Execution excellence comes to the fore with first-quarter beat
  • Positive surprise on top line, sustenance of momentum key
  • Upgrades FY21 EPS by about 5% on better-than-expected demand momentum
  • Key driver for Asian Paints — strong market share focus; expanding revenue base; and expanding margins and moderating capex to drive improvement in free cash flow and return ratios


  • Maintains ‘underperform’ with a price target of Rs 1,469 apiece
  • Recovery run-rate ahead of expectation
  • Maintenance and water-proofing demand leading the recovery
  • Expects part of first-quarter recovery run-rate is due to pent-up demand
  • Benign raw material prices to remain supportive of margins

Motilal Oswal

  • Upgrades to ‘neutral’ with a price target of Rs 1,605 apiece
  • Sharp decline on all fronts, but momentum in June drives strong beat
  • Likelihood of sharp earnings decline, as feared earlier, may not materialise
  • Possible that Asian Paints, unlike other discretionary peers, would emerge relatively unscathed from the Covid-19 crisis
  • Rich valuations with uncertain earnings growth and weaker return on capital employed versus peers prevent the brokerage from turning more constructive

Emkay Global

  • Maintains ‘hold’/’underweight’ with a target price of Rs 1,670 apiece
  • Volume decline driven by lockdown; trends indicate strong pickup in May/June
  • Gross margins decline sequentially due to unfavorable mix and trade incentives
  • Fast demand recovery is a positive sign but it is largely priced in
  • Like management’s agility in driving value-for-money and waterproofing products
  • Despite optimistic growth and margin assumptions, valuations at 46 times its estimated FY22 EPS limit upsides
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