Asian Paints shares may not rise more from current levels, say analysts as competition rises

At 28%, EBITDA reported a beat led by a higher-than-expected gross margin improvement. Asian Paints achieved a 22% EBITDA margin in the first nine months of FY24. However, management reiterated its EBITDA margin guidance of 18-20% in the medium term.

Global brokerages Jefferies and CLSA have issued an 'Underperform' rating on the stock while HSBC issued a 'Buy' rating with a target price of ₹4,020 a share. HSBC sees fear of price-based competition exaggerated apart from a strong growth outlook.

Motilal Oswal: The domestic broking firm remains cautious as it believes the paints segment will not enjoy higher multiples of the past. "It is important to note that the re-rating of the stock was a significant factor driving the appreciation of Asian Paints' stock price over the past five to six years, as the earnings CAGR has been in the 12-14% range," Motilal said.

The brokerage believes valuations are expensive considering the uncertain competitive pressure. It reiterated its 'Neutral' rating with a target price of ₹3,340 per share.

Kotak remains cautious, given the deceleration in underlying demand and potential impact of Grasim's launch on industry profitability, likely resulting in negligible FY2024-26E EPS CAGR. It revised its fair value to ₹3,100 from ₹3,050 per share earlier.

Nuvama remains positive on Asian Paints due to high entry barriers and its best-in-class R&D. "Rolling over to Q3FY26E yields an increased target price of ₹3,790 from ₹3,650 earlier," it said while retaining a 'Buy' rating on the counter.

Out of the 37 analysts that track Asian Paints, nine continue to have a 'Buy' recommendation on the stock, 13 say 'Hold', while 15 of them have a 'Sell' rating.

The stock was trading 4% lower on Thursday post its earnings. Asian Paints shares have gained nearly 7% in the last one year while it has tumbled 7.38% since the beginning of this year.