Asian Paints Faces Stock Decline: Analysts Lower EPS Estimates Following Q3 Results
Asian Paints Ltd., India’s largest paint manufacturer, is facing a wave of caution from analysts following its December quarter results. After reporting its Q3 performance on February 4, 2025, the stock saw a significant drop of nearly 5%, with many analysts lowering their earnings estimates for the company in the coming years.
A Mixed Picture Post Q3 Results
Asian Paints delivered results that were in line with subdued expectations, with both volume growth and margins surpassing what was anticipated. Despite this, the overall market sentiment towards the stock remains negative.
The performance didn't provide enough clarity to lift the outlook for the near future, which has led nearly half of the 39 analysts tracking the stock to adopt a cautious stance. Specifically, 18 out of 39 analysts have issued a "sell" rating on the stock, reflecting concerns over the company’s near-term prospects. The rest of the analysts are split between 11 hold recommendations and 10 buy ratings.
Analyst Concerns: The Key Drivers of the Downward Revision
Several leading brokerages have lowered their Earnings Per Share (EPS) estimates for Asian Paints for the upcoming years. Here’s a look at some of the key analysts and their perspectives:
Goldman Sachs has issued a "sell" recommendation with a price target of ₹2,275. The brokerage has highlighted the company’s worsening revenue decline due to a deteriorating product mix. Additionally, they believe the increased competitive intensity will further pressure margins. As a result, Goldman Sachs has slashed its EPS estimates for FY 2025, 2026, and 2027 by 4% to 5%.
Morgan Stanley, which has an "underweight" rating with a target price of ₹2,358, has pointed out that while margins were better than expected, the company's focus should shift to volume growth recovery in the near term.
Jefferies, one of the most pessimistic brokerages, has lowered its target to ₹2,000 and maintains an "underperform" rating. Jefferies expects that Asian Paints' margins will stabilize between 18% and 20% in the medium term but anticipates gradual demand recovery. They also cut EPS estimates by 4% to 8%, citing potential pressures in Q4.
On the flip side, Macquarie remains among the few optimistic voices. They have an "outperform" rating with a price target higher than most, but even they acknowledge that demand momentum is likely to remain weak for the next two quarters. They believe that clearer visibility on growth will be essential for the stock’s performance going forward.
The Market Reacts: A 5% Dip in Asian Paints' Stock
Following these downgrades, shares of Asian Paints opened 4.4% lower on Wednesday, trading at ₹2,250, after closing 2.5% higher on Tuesday, which followed the company’s results announcement. This volatility highlights the market’s cautious view on the stock in the wake of lower earnings expectations and a challenging demand environment.
Management’s Outlook: A Cautiously Optimistic Stance
Despite the unfavorable analyst reviews, Asian Paints’ management remains cautiously optimistic. The company continues to invest in its brand-building initiatives and is hopeful that demand will recover, albeit gradually. The key focus for management is to navigate the ongoing challenges while maintaining profitability and market share.
Conclusion: The Road Ahead for Asian Paints
Asian Paints is undoubtedly facing a challenging period. While its Q3 results showed some positive surprises in terms of margins and volume growth, the company must address concerns over competitive pressure and subdued demand in the coming quarters. The stock's performance in the short term may hinge on improved volume growth and clearer signs of recovery in the broader economy.
For investors, the path forward appears uncertain, and it is clear that the stock's movement will be tied to how the company adapts to the evolving market conditions. Analysts are watching closely, and the next few quarters will be pivotal in shaping the future direction of Asian Paints Ltd.
Reference from:-https://www.cnbctv18.com/market/asian-paints-share-price-q3-results-target-buy-or-sell-brokerages-volumes-margin-demand-outlook-19552742.htm