Asian Paints faced a challenging start to the week on Monday, February 26, with shares opening lower. This decline follows sharp reductions in target prices by several global brokerages, citing increased competition due to Grasim Industries’ entry into the paint sector. Analysts suggest that Asian Paints may not be insulated from this heightened competitive environment.
CLSA downgraded Asian Paints from ‘Underperform’ to ‘Sell’ and drastically cut the target price from Rs 3,215 to Rs 2,425, marking a significant 24.57% reduction. The brokerage anticipates heightened competitive pressure in the paint sector with the introduction of Grasim Industries’ Birla Opus. While Asian Paints may maintain its long-term market position, near-term growth and margins could be impacted.
Goldman Sachs also lowered the target price to Rs 2,825 from Rs 3,300 and adjusted EPS estimates for FY25 and FY26 downwards. They reduced target multiples from 58 times to 52 times, highlighting the comprehensive nature of Birla Opus’ paint strategy.
However, Macquarie remains optimistic, maintaining an ‘Outperform’ rating on Asian Paints with a target price of Rs 4,000. The brokerage emphasizes Grasim Industries’ focus on distribution and product quality, favoring Asian Paints over smaller competitors like Berger Paints, which may face greater challenges from the new entrant.
Grasim Industries’ stock, meanwhile, experienced a slight dip, trading at Rs 2,183.95 following a significant surge.
In recent developments, Aditya Birla Group revealed plans for its decorative paints business, aiming for initial revenues of Rs 10,000 crore and profitability within three years. The group inaugurated three Birla Opus paints plants, expressing ambitious goals for the venture’s growth and profitability. Grasim Industries, the group’s flagship, had previously announced its entry into the decorative paints sector, earmarking investments of Rs 10,000 crore to establish six manufacturing plants in India by 2025.
