homemarketstocksAsian Paints best performer on Nifty50; Berger Paints, Kansai Nerolac gain on price hike news
Asian Paints best performer on Nifty50; Berger Paints, Kansai Nerolac gain on price hike news
Asian Paints shares surged over 6 percent on Wednesday after a brokerage firm's said the company undertook a price hike of 9 percent across portfolios. Meanwhile, some brokerages reported that a price hike of about 8-9 percent has been announced by Berger Paints as well. This led to a perception that other paint manufacturers may follow the suit soon.
Shares of Asian Paints surged over 6 percent on Wednesday after a brokerage firm said the company undertook a price hike of 9 percent across portfolios. Asian Paints was the best performer on Nifty50 today.
At 9:46 am, shares of Asian Paints were trading 5.7 percent higher at Rs Rs 3,132.2 on the BSE. The stock has been gaining for the last two days and has risen more than 7 percent during the period.
Nomura said that channel checks indicated a price hike of 9 percent across portfolios. The price hike is higher than the cumulative price hike over the past six months i.e. 7.5 percent in the first half of the current financial year.
With a sharp price hike, the brokerage expects the margin gap to be materially bridged. The paints company will require only 5 percent additional price increase to fully bridge the gap, Nomura added.
Asian Paints confirmed that the price hike will be effective from November 12.
In the past month, the paint maker's stock has slumped 9 percent as compared to the benchmark Nifty50 that was up over 2 percent.
After reporting lower-than-expected quarterly numbers last week followed by a sombre brokerage commentary, shares of Asian Paints had witnessed heavy selling pressure.
Further, reports stating a whistle-blower has flagged off related party transactions carried out by Asian Paints' promoters that allegedly benefited them at the cost of the company’s shareholders, had also created an overhang on the stock.
The demand scenario remains quite strong and the consumer is willing to spend so that should be favourable for companies like Asian Paints, where they have got very strong franchising for retail customers, said Deven Choksey of KRChoksey.
“They have been increasing the price largely to meet the effect of higher raw material price and this is not stopping. I think this is a little bit of a worry too because whether 100 percent of the price increase gets passed over in respective quarters or respective period remains to be seen,” Choksey said.
“In my viewpoint, I think unless you see some kind of softening of the cost pressure I am not thinking that the immediate reaction would come in form of the rerating of the stocks or better valuation of the stocks,” he added.
Meanwhile, some brokerages reported that a price hike of a similar quantum of about 8-9 percent has been announced by Berger Paints as well. Shares of Berger Paints India were up 4.6 percent at Rs 766.30.
This led to a perception that other paint manufacturers may follow the suit soon. Shares of Kansai Nerolac Paints, Shalimar Paints and Indigo Paints gained 2-4 percent today.
First Published: Oct 27, 2021 10:36 AM IST
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