Asian Paints gets a downgrade, lowest price target post Birla Opus launch

Asian Paints Ltd., the leader in India's paints sector has received a downgrade from brokerage firm CLSA citing increasing competitive intensity post Grasim's "Birla Opus" launch last week. CLSA has downgraded the stock to "sell" from its earlier "buy" rating.

CLSA has also cut its price target on Asian Paints to ₹2,425 from ₹3,215 earlier. The revised price target implies a potential downside of 19% from Friday's closing levels. This is also the lowest price target on the street for the paints giant.

The brokerage believes that while Asian Paints is likely to emerge as the leader post the paints market shake up, it will not be a "shoo-in" or absolutely certain that it will happen so.

CLSA is also anticipating a de-rating to take place for Asian Paints and a move back to its 15-year average multiple. As a result, it has cut its financial year 2025 - 2026 earnings estimates by 8% and 10% respectively.

Aditya Birla Group's Grasim Industries launched its paints business last week, three years after announcing a foray into the sector with a ₹10,000 crore war chest. Chairman Kumar Mangalam Birla has set a target for the paints business to reach profitability and cross ₹10,000 crore in revenue in the next three years. You can read more on that here.

In response, while Goldman Sachs has not downgraded Asian Paints, maintaining its "neutral" rating it has cut its price target on the stock to ₹2,850 from ₹3,300 earlier.

The brokerage though, has cut its Earnings Per Share (EPS) estimate for Asian Paints for financial year 2025 and 2026 by 5.2% and 10.9% respectively, citing that Birla's paint entry strategy was way more comprehensive than earlier assumed.

However, brokerage firm Macquarie has maintained its "outperform" recommendation on Asian Paints with a price target of ₹4,000. It believes that despite the new launch, discounting levels will not rise sharply for the industry and that it prefers Asian Paints over Berger, which would be relatively more affected by the new entrants.

Citi is confident of Grasim's ability to achieve the vision of becoming the No. 2 player as they have developed differentiated products compared to competition. The company also has a clear dealer pull plan in place. It has maintained its "buy" rating on Grasim with a price target of ₹2,650.

Out of the 37 analysts that have coverage on Asian Paints, 16 of them now have a "sell" or equivalent rating on the stock. 12 analysts have a "hold" call, while the remaining nine have a "buy" rating.

Shares of Asian Paints have risen 8.5% over the last 12 months.