India's largest paints player Asian Paints Ltd.'s earnings show for the quarter failed to impress analysts, as most maintained their bearish calls or trimmed their bullish target prices. Shares tumbled four percent in early trade on February 5.
Asian Paints reported a 23 percent drop in net profit at Rs 1,128 crore for the quarter ended December 31, 2024 hit by weak festive season demand. The paint maker reported net profit of Rs 1,475 crore in the year-ago period.
The company's revenue declined 6 percent to Rs 8,549 crore in Q3FY25 as against Rs 9,103 crore in Q3FY24. The December quarter marked the fourth consecutive quarter of revenue decline for Asian Paints. However, the management foresees revenue growth returning within the next few quarters.
At 9.35 am, Asian Paints shares were quoting Rs 2,251.3, lower by 4.4 percent on the NSE.
The paints major saw muted demand as a result of the weak festive season and lagging urban demand. Although the operating margins improved on a sequential basis but on a yearly basis, the margins remained impacted due to increased distribution expenses.
In the near term, the company remain cautiously optimistic on a recovery in demand conditions while it shall continue to invest in its brand and focus on innovation and customer centricity. Further, volume growth is likely to be in single-digits going forward, while EBITDA margins are likely to be 18–20 percent. Some softening is anticipated in raw material prices
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International brokerage Goldman Sachs maintained its 'sell' call, with a price target of Rs 2,275, as the near-term demand is likely to remain subdued. Further, the increased competitive intensity is likely to rise.
The demand outlook remains weak along with downtrading by customers, which led to an adverse product mix, noted Nuvama Institutional Equities. The rural outlook remains strong, but urban shall pick up only after two more quarters. The brokerage kept its 'buy' rating intact, but trimmed its estimates and target price to Rs 3,000 per share, down from Rs 3,185 apiece.
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