Asian Paints' stock is facing selling pressure following a disappointing Q2FY24 earnings report, despite an endorsement from HSBC. The company reported a 53.3% YoY increase in consolidated net profit for Q3 2023, amounting to Rs 1,232.4 crore (Rs 1 crore = $120,127), falling short of the projected Rs 1271 crore. In addition, the firm's consolidated revenue from operations grew by a mere 0.2% YoY to Rs 8,478.6 crore, underperforming the estimated Rs 8,970 crore.
Despite these results, HSBC maintains a buy view on Asian Paints' stock, setting a price target of Rs 4,000 ($1 = Rs 83.2). This optimistic outlook is attributed to a robust H2FY24 forecast and an attractive valuation. However, not all financial institutions share this sentiment.
Motilal Oswal has adopted a neutral position due to competition-related challenges and has consequently revised its EPS forecast downwards.
Motilal Oswal also highlighted potential challenges for Asian Paints, including the adverse effects of erratic rainfall on demand and the burden of escalating input costs. The firm further warned that the entry of well-funded competitors could disrupt the market and alter demand and margin structures.
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