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Asian Paints share climbs over 4% post Q4 earnings; here's what brokerages say

Asian Paints share price gained up to 4.33%  or  Rs 73 to Rs 1,756 against previous close of Rs 1,683 on BSE

twitter-logoBusinessToday.In | June 24, 2020 | Updated 10:30 IST
Asian Paints share climbs over 4% post Q4 earnings; here what brokerages say
Asian Paints share price has lost 2% since the beginning of this year and gained 27.24% during the last one year

Share price of Asian Paints rose over 4% after the firm reported a 1.18 per cent fall in consolidated net profit for fourth quarter. Asian Paints share price gained up to 4.33%  or  Rs 73 to Rs 1,756 against previous close of Rs 1,683 on BSE. The large cap stock closed 1.83 per cent higher on Tuesday ahead of Q4 earnings.

Today, market cap of the firm rose to  Rs 1.68 lakh crore. Asian Paints share has lost 2% since the beginning of this year and gained 27.24% during the last one year. Total 0.49 lakh shares of Asian Paints changed hands amounting to turnover of Rs 8.80 crore on BSE.

The stock climbed to its 52 week high of Rs 1,915 on March 9, 2020 and 52 week low of Rs 1,291 on July 9, 2019.

Net profit in Q4 was impacted by the COVID-19 lockdown. The firm reported Rs 480.25 crore net profit in Q4 against net profit of Rs 485.99 crore during January-March quarter of the previous fiscal.

Revenue from operations fell 7.13 per cent to Rs 4,635.59 crore in Q4 against Rs 4,991.50 crore in the corresponding quarter of previous fiscal.

"Loss of sales due to the lockdown in March 2020 impacted the decorative business segment in an otherwise strong quarter with double-digit volume growth in the first two months of the quarter. Even with the loss of sales, the decorative business segment in a tough year has registered double-digit volume growth for the year and strong profit numbers," the company said.

For FY 20, net profit rose 25.64 per cent to Rs 2,774.19 crore against Rs 2,208.04 crore in 2018-19. Revenue from operations climbed 5 per cent to Rs 20,211.25 crore in 2019-20 from Rs 19,248.45 crore in 2018-19.

Downturn in auto, real estate sectors, lockdown pains hit Asian Paints

The company's board recommended a final dividend of Rs 1.50 per equity share for the financial year ended March 31, 2020.

After the earnings, brokerages expressed their views on company's performance.

CLSA said Asian Paints reported low, single-digit volume growth. The firm expects demand to be restored in second half of 2020. Diversified portfolio and strong brands will help gain market share. Valuation of the stock leaves little room for further upside.The brokerage gave a target price of Rs 1,710 for the stock.

Credit Suisse said the firm delivered volume growth in 4Q despite 1 week of lost sales due to Covid lockdown. For January and February volumes grew in double digits and FY20 ended with 11% volume growth.

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The brokerage cut FY21E earnings by 4% but kept FY22 earnings estimates unchanged. Target price for the stock is Rs 1850.

Citing the post earnings conference call, Edelweiss said rural - urban mix pre COVID-19 was 50:50. Production level is at 60-70% of pre COVID-19 level. In terms of migrants, the brokerage expects many painters returning. Also at manufacturing plants, workers have started coming back.

The brokerage maintained buy call on the stock with a target price of Rs 1910.

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"We expect decorative volumes to sustain riding potential demand shift from the unorganised segment (30%). This, coupled with firm's capability to hike prices, should help maintain margin. At CMP, the stock is trading at 52.9x FY22E EPS," Edelweiss said in its report.

By Aseem Thapliyal

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