December 9, 2023

Asian Paints Ltd is a large-cap company with a market capitalization of 253,319 Crore that operates in the Consumer Durables industry. Asian Paints’ shares opened at 2622.05 and closed at 2,641.00 today, indicating a 0.74 per cent decline from its previous closing of 2660.75. The stock touched a 52-week low on the NSE today at 2,585 in morning deals and had touched a 52-week high of 3,590 on January 10, 2022, indicating that the stock, after hitting a 52-week low today, is trading at a 26 per cent discount from its 52-week-high. The stock has dropped 2.76 per cent in the previous five trading sessions and 11.96 per cent in the last month. Asian Paints’ shares have fallen 20.02 per cent in the previous six months, and the stock has fallen 22.83 per cent year to date (YTD) so far in 2022. After touching an intraday low today of 2585 (-2.89%), Asian Paints is now trading below the 5-day, 20-day, 50-day, 100 days, and 200-day moving averages.

US monetary policy tightening, which may influence key growth sectors like housing and automobiles, new Covid variants and their impact on global business operations, geopolitical tensions such as higher crude oil prices which is at a record high level of 121 since 2008, inflation, economic and forex crisis in the global economy are the key factors for the share price to fall.

The brokerage firm HDFC Securities has given a ‘HOLD’ rating on the shares of Asian Paints and have said in a note that “We are impressed with the overall performance in Q4FY22 despite the challenging environment of weak consumer sentiments and inflation across the raw material basket. The management continues to focus on its execution capabilities towards increasing distribution reach, launching breakthrough innovative products, and expanding the Home Décor portfolio. However, the near-term challenge still persists and we would wait to see if the visibility of the near term performance sustains before we change our rating to BUY. We continue to maintain our HOLD rating with an unchanged TP of 3,200 (57x FY24E EPS).”

Brokerage firm IDBI Capital has said in a note by giving a ‘HOLD’ rating that “Asian Paints (APNT) reported in-line result. Volume growth trend in decorative is encouraging at 8%YoY on a high base of 48%. This performance is despite soft business in Jan’22 due to Omicron. In Home Décor; APNT guides for complete control on value chain with almost all categories being owned/manufactured by the brand. APNT expects revenue contribution from Home Decor to double from 4% to 8-10% by FY26. Gross and EBITDA margin contraction subsided due to calibrated price hikes in Nov-Dec’21. Further; APNT took 2% price hike in AprMay’22 and expects 5% more price hike in 1QFY23. As per revised outlook; we have marginally trimmed our EPS estimate by 3-4% in FY23-24E. We have cut our multiple to 65x. Our target price stands at 3,453 with HOLD rating.”

ICICI Securities have said “Strong brand, market leadership position and a robust balance sheet condition justify APL’s premium valuation. APL has been a consistent compounder with stock price appreciating at 22% CAGR over the last five years. We change our rating on stock from BUY to HOLD. We revise our target price to 3400/share and value APL at 65x P/E FY24E EPS.”

The most current RSI indicator of 30.20 indicates that the stock is neither overbought nor oversold. Over the previous two to three years, the firm has maintained a respectable ROE of more than 23%, and what seems appealing is that the company has a ROCE of 30.27 per cent for March 2022, which is greater than the ROE of 23.48 per cent. It signifies that the firm has used debt in a good manner to decrease its weighted average cost of capital. However, the stock has a book value per share of 148.03, which is 17.8 times its book value at the present level.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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