Asian Paints at new high, up 9% post Q1; monsoon, 7th Pay key

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Asian Paints shares hit a record high of Rs 1,152.65, up 8.55 percent intraday after better-than-expected quarterly earnings aided by strong operational performance and retaining double digits growth in volume.

First quarter (April-June) earnings beat analysts' expectations on Wednesday with consolidated profit growing 18.7 percent year-on-year to Rs 553 crore while revenue grew by 10.2 percent to Rs 4,082 crore, aided by volume growth. A CNBC-TV18 poll estimated profit at Rs 518 crore on revenue of Rs 4,021 crore for the quarter.

"The decorative business segment in India registered double digit growth during the quarter and international business performed well aided by good growth in markets like Nepal, UAE and Fiji," KBS Anand, MD and CEO said.

He expects a good monsoon and pay hikes for government employees to boost demand for decorative paints, saying the decorative paints market has picked up in the last three quarters.

Operating profit climbed 20.9 percent to Rs 820 crore and margin expanded by 180 basis points to 20.1 percent on yearly basis, aided by lower raw material prices despite higher promotional spends.

Brokerage houses are mixed on the counter as overall they waited for monsoon and 7th pay commission to reflect in earnings, though the company maintained double-digit volume growth when every single consumer goods firm is grappling with slowdown issues.

With retaining neutral rating as valuations remain stretched and raising target price to Rs 960 (from Rs 880 earlier), Credit Suisse increased its 2018 earnings by around 4 percent, given the clear commentary of improving volume trends and benign input costs but says the reason for pick up in volume is not clear as monsoon and pay commission are yet to play out.

"What is surprising is that Asian Paints is seeing such strong volume growth despite the overall weakness in rural demand for other consumer companies and two back to back failures in the monsoons. Triggers such as good monsoons in FY17 and the pay commission impact in urban home improvements are yet to play out, and even before that demand trends have picked up to strong levels," it explains.

The brokerage believes the strong volume traction will provide downside support to the stock. Asian Paints is going ahead with Rs 600 crore capex in FY17 to keep up with the high volume growth.

CLSA has retained high conviction sell on the stock, though it likes company's growth story and raised target price to Rs 925 from Rs 900.

GST implementation would be a key positive catalyst in the near term, as it should reduce the tax outgo and aid conversion from the unorganised sector, the brokerage said.Nomura feels the stock is expensive at 41.3x FY18 P/E. As crude prices start to rise, the brokerage house expects the margin expansion to fall in the coming quarters. It has retained reduce rating on the stock with target price of Rs 771.

Deutsche Bank has maintained hold rating on the stock with target of Rs 920 as it believes the stock is fully priced and target 35x P/E FY18 is appropriate.

According to the brokerage house, upside risk is faster urban recovery while downside risks are lag between input inflation and price increases. At 12:13 hours IST, the scrip of Asian Paints was quoting at Rs 1,133.00, up Rs 71.20, or 6.71 percent amid high volumes on the BSE.Posted by Sunil Shankar Matkar