Asian Paints cracked 5 per cent in intra-day deals on Monday. Berger Paints, Indigo Paints, Kansai Nerolac, Shalimar Paints and Sirca Paints were down 1 – 3 per cent each.
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Shares of paint companies were under pressure, falling up to 5 per cent on the BSE in Monday’s intra-day trade amid concerns that Grasim’s entry into the paint sector will intensify the competition.
Shares of Asian Paints hit a 10-month low of Rs 2,850, as they slipped nearly 5 per cent after the brokerage firm CLSA downgraded the stock post Birla Opus launch. The stock of the paint maker was trading at its lowest level since April 28, 2023.
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At 09:56 am; Asian Paints was down 4 per cent at Rs 2,873.35, as compared to 0.33 per cent decline in the S&P BSE Sensex. The stock has corrected 20 per cent from its 52-week high of Rs 3,566.90 touched on July 24, 2023. It had hit a 52-week low of Rs 2,705.90 on April 3, 2023.
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Last Updated: Feb 26 2024 | 03:59 PM IST
Berger Paints India, Indigo Paints, Kansai Nerolac Paints, Shalimar Paints and Sirca Paints India were down in the range of 1 per cent to 3 per cent. In comparison, the S&P BSE Sensex was down 0.37 per cent at 72,870.
Grasim Industries, the flagship firm of Aditya Birla Group, announced its entry into the decorative paint business in India on Thursday with the launch of the new brand “Birla Opus”. Kumar Mangalam Birla, the group’s chairman, said that the company is aiming for revenue of Rs 10,000 crore in three years of full-scale operations.
Birla Opus will have over 145 products and 1200 SKUs across water-based paints, enamel paints, wood finishes, waterproofing and wallpapers. The company has launched factories, operations, products, and services in one go on a large scale, which is unprecedented in this business. The company’s paint capacity in its first year of operations will be greater than the combined capacity of the second, third and fourth largest players.
Foreign brokerage firm CLSA downgraded Asian Paints to ‘Sell’ from ‘Underperform’ and slashed the target price to Rs 2,425 from Rs 3,215 earlier. In its note, the global brokerage said that the competitive intensity in the paint sector is likely to heat up significantly with the advent of Grasim Industries’ Birla Opus.
While the premium segment is seeing slower growth, traction in luxury is positive. In the coming quarters, Asian Paints will continue to benefit from a rural recovery, strong growth in the industrial businesses and continued traction in the projects business. With the entry of a large player in the paints industry in Q4FY24E, the competitive intensity is likely to ramp up, analyst at KRChoksey Shares and Securities had said in the Q3 result update.
Asian Paints has all the ingredients to outperform its peers in the long run. Some of these factors are: – 1) Improving demand, especially in rural areas, 2) Falling raw material prices and efficient sourcing, and 3) The recent announcement to expand production presence and backward integration of key raw materials. These are steps in the right direction to achieve the next level of growth and secure its market share in the long term, analysts at Axis Securities said in the result update.
However, the brokerage firm believes the stock is likely to see sideways movement owing to increased competition from the new entrants (JSW and Grasim) which will keep the profitability under check in the near term.
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