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Asian Paints falls 3% post March qaurter numbers

Motilal Oswal Securities has downgraded the stock to sell, with a target price of Rs 1,150.

ETMarkets.com|
Updated: May 10, 2019, 03.42 PM IST
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"Asian Paints' numbers were significantly lower than our and consensus estimates in terms of both- volume and pricing growth," said Reliance Securities.
NEW DELHI: Shares of Asian Paints declined over 3 per cent in morning trade on Friday after the company missed Street's estimates in its March quarter numbers.

The company on Thursday posted a 1.6 per cent year-on-year (YoY) fall in consolidated profit after minority interest at Rs 473.11 crore for March quarter. Analysts in an ET NOW poll had projected a profit of Rs 595 crore.

"Asian Paints' numbers were significantly lower than our and consensus estimates in terms of both- volume and pricing growth," said Reliance Securities.

The brokerage highlighted while the company delivered double-digit volume growth for the quarter, higher contribution low-end products led to slower revenue growth.

Rising cost structure because of the commissioning of new plants and higher marketing spends resulted in significantly lower Ebidta margins, the brokerage added.

The brokerage has downgraded the stock to hold, reducing the target price to Rs 1,305.

Motilal Oswal Securities has also downgraded the stock to sell, with a target price of Rs 1,150.

"We cut our FY20, FY21 earnings per share (EPS) forecast sharply by 16.5 per cent and 15.3 per cent, respectively to factor in the slowdown amid a higher fixed cost environment," the brokerage said.

Weakening operating performance and the deteriorating mix over the past few quarters, severely affecting the gross margin, has also triggered a cut in EPS forecast, the brokerage added.

The brokerage highlighted that the uncertain operating environment will hit the prospects of earnings recovery for the company.

"Given the current uncertain operating environment, the prospects of a sharp earnings recovery and a RoCE improvement now appear bleak. P/E multiples of 57.3 times FY20E and 47.1 times FY21E EPS appear stretched," MOSL added.

Shares of Asian Paints closed 1.10 per cent down at Rs 1,340.95 on BSE.

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