Asian Paints Drops 5% After Weak Q3 Results – Buy, Sell, or Hold?
Asian Paints announced its quarterly results on Tuesday, February 4, reporting better-than-expected volume growth and margins. However, revenue decline and increased competition remain key concerns for analysts.
Brokerage Views:
- Goldman Sachs: Maintains a sell rating with a price target of ₹2,275. The brokerage cited revenue decline due to an unfavorable mix and expects near-term demand to stay weak. It also lowered EPS estimates for FY25, FY26, and FY27 by 4-5%.
- Morgan Stanley: Remains underweight on Asian Paints with a price target of ₹2,358, indicating concerns over competitive pressures in the market.
Despite better-than-expected margins, analysts believe the key concern remains the recovery in volume growth. Asian Paints’ management has expressed cautious optimism about near-term demand trends while continuing to invest in brand-building efforts. However, leading brokerage firms remain skeptical. CLSA has maintained an “underperform” rating with a price target of ₹2,047, while Jefferies holds the lowest target at ₹2,000, citing slow demand recovery. Analysts anticipate margins to stay in the 18-20% range in the medium term, but with ongoing challenges and potential pressures in Q4, Jefferies has revised its EPS estimates downward by 4% to 8%.