- Asian Paint Limited’s shares witnessed heavy selling pressure and were down 6.37% at ₹2,691.35 on Friday’s intra-day trade.
- One of the major reasons for the selling pressure is the rise in crude oil prices due to the Russia-Ukraine conflict.
- Most of the Middle East and specific challenges like civil unrest in Ethiopia and forex crisis in Sri Lanka.
Asian Paint Limited’s shares witnessed heavy selling pressure and were down 6.37% at ₹2,691.35 on Friday’s intra-day trade. The shares have fallen by more than 15% in the last three trading sessions, and by 17% in the last month.
One of the major reasons for the selling pressure is the rise in crude oil prices due to the Russia-Ukraine conflict. Crude oil prices recently crossed to almost $120 per barrel. Higher crude oil prices increase input costs for companies which ultimately decrease profitability for paint companies.
The stock’s 52-week low is ₹2,343.05 and its 52-week high is ₹3,590.00 per share and at the current levels, it is nearing its 52 week low.
Its gross margins shrank from 833bps YoY to 36.8% in the October to December quarter as its gross margins were affected by the steep and unprecedented inflationary trend in raw material prices.
Asian Paints while announcing its Q3 results on January 20, 2022, had said that Its consolidated revenue grew by 25.6% YoY while EBITDA declined 13.7% and PAT declined by 18.0% Its international business was impacted by sluggish market conditions in most of the Middle East and specific challenges like civil unrest in Ethiopia and forex crisis in Sri Lanka.
Analysts at ICICI Securities said that in the January to March quarter, the demand is likely to be impacted by a higher base and slow offtake by dealers due to various Covid led restrictions. Long term growth drivers like shortening of repainting cycles and strong recovery in the real estate sector might help to drive future demand for decorative paints.
ICICI Securities has given a hold call on Asian Paints as of March 2, 2022. The analyst has given a target of ₹3300, with a holding period of one year.
Currently, the stock is trading at ₹2,691.35 levels and investors can buy it if they wish to hold it for a period of one year.
“It is a bit early to conclude that the worst impact on some of the oil users be it paint companies or auto companies or cement companies is over. If the crude and some of the other commodity prices including the chemical prices continue to remain elevated for a bit longer, then we have to consider what sort of overall demand impact it can have on India’s fiscal positioning versus what was anticipated in Budget Estimates,” said Hemang Jani, Equity Strategist & Senior Group VP, Motilal Oswal Financial Services Limited.
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