Asian Paints was the top loser in the 50-share Nifty on
Monday, falling 5 per cent in a positive market. India's largest paint
company on Friday missed volume growth and margins estimates,
disappointing analysts.
Asian Paints reported a consolidated net profit of Rs 399 crore on sales of Rs 3,730 crore in Q2, which was below estimates. Volume growth during the quarter was 7-8 per cent (versus estimates of over 10 per cent), while gross margins came in at 45.5 per cent, slightly below estimates.
Domestic paints business, which contributes nearly 80 per cent to Asian Paints' topline, saw sluggish growth impacting operational numbers, analysts said.
Asian Paints' management said overall demand environment remained weak, adding that deficient monsoons and a delayed Diwali impacted volume growth.
Motilal Oswal noted Asian Paints' volume growth in domestic decorative paints at 7-8 per cent was healthy, but added that a combination of down-trading (higher growth in putty and lower end distempers) and higher discounts impacted overall revenue growth.
Kotak Securities said that Asian Paints' continues to underperform despite a sharp fall in raw material prices. The brokerage cut its target price on the stock from Rs 800 to Rs 750 post Q2 earnings announcement.
"We note that the sharp raw material (price) decline has failed to prop up trailing twelve months earnings per share (EPS) growth trajectory for Asian Paints - the same stood at 17 per cent for 2QFY16 and has been in a tight 10-20 per cent range for the past many quarters," the brokerage said.
Kotak held on to its "reduce" rating on Asian Paints, but Motilal Oswal downgraded Asian paints to "neutral" citing absence of pick-up in demand. Near-term risk reward is unfavourable, the brokerage added.
Nomura, which has a positive view on Asian Paints, said that weak international business and domestic home improvement business pulled down earnings.
"We believe the upcoming Diwali festival and lower base effect should help volume growth to accelerate. We continue to believe that the long-term growth drivers remain in place," said Nomura, which has a "buy" rating with a target price of Rs 870.
G Chokkalingam of Equinomics Research & Advisory told NDTV that investors should hold Asian Paints as long as Brent stays around $50 per barrel. However, he advised against fresh buying in the counter.
As of 10.28 a.m., Asian Paints shares traded 5 per cent lower at Rs 815.50 as compared to 0.2 per cent gain in the broader Nifty.
Asian Paints reported a consolidated net profit of Rs 399 crore on sales of Rs 3,730 crore in Q2, which was below estimates. Volume growth during the quarter was 7-8 per cent (versus estimates of over 10 per cent), while gross margins came in at 45.5 per cent, slightly below estimates.
Domestic paints business, which contributes nearly 80 per cent to Asian Paints' topline, saw sluggish growth impacting operational numbers, analysts said.
Asian Paints' management said overall demand environment remained weak, adding that deficient monsoons and a delayed Diwali impacted volume growth.
Motilal Oswal noted Asian Paints' volume growth in domestic decorative paints at 7-8 per cent was healthy, but added that a combination of down-trading (higher growth in putty and lower end distempers) and higher discounts impacted overall revenue growth.
Kotak Securities said that Asian Paints' continues to underperform despite a sharp fall in raw material prices. The brokerage cut its target price on the stock from Rs 800 to Rs 750 post Q2 earnings announcement.
"We note that the sharp raw material (price) decline has failed to prop up trailing twelve months earnings per share (EPS) growth trajectory for Asian Paints - the same stood at 17 per cent for 2QFY16 and has been in a tight 10-20 per cent range for the past many quarters," the brokerage said.
Kotak held on to its "reduce" rating on Asian Paints, but Motilal Oswal downgraded Asian paints to "neutral" citing absence of pick-up in demand. Near-term risk reward is unfavourable, the brokerage added.
Nomura, which has a positive view on Asian Paints, said that weak international business and domestic home improvement business pulled down earnings.
"We believe the upcoming Diwali festival and lower base effect should help volume growth to accelerate. We continue to believe that the long-term growth drivers remain in place," said Nomura, which has a "buy" rating with a target price of Rs 870.
G Chokkalingam of Equinomics Research & Advisory told NDTV that investors should hold Asian Paints as long as Brent stays around $50 per barrel. However, he advised against fresh buying in the counter.
As of 10.28 a.m., Asian Paints shares traded 5 per cent lower at Rs 815.50 as compared to 0.2 per cent gain in the broader Nifty.
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