Asian Paints shares plunge 5% post Q3 results; should you buy, hold or sell stock?

Shares of Asian Paints Ltd dropped 5 per cent in Wednesday's trade after its December quarter revenue and Ebitda fell short of consensus estimates. Analysts said there will be a favourable base starting from Q4FY25, but Asian Paints is likely to post muted growth rates in 2025, considering a stress in urban markets. Besides, there are concerns that competitive intensity will materially increase in H1FY26, as Grasim Industries Ltd would commence plants and largely roll out the distribution network.

Asian Paints shares fell 5.10 per cent to hit a low of Rs 2,235. The stock has corrected 23 per cent in the past three months, and is now trading at 41 times FY27 EPS, as per analyst estimates.

"While Asian Paints is able to pass on inflation in normal circumstances, we model Asian Paints to face challenges now given the difficult macro environment. There is also a possibility of cyclical slowdown in the auto sector which may impact industrial coatings," ICICI Securities said while suggesting a target price of Rs 2,200 on the stock.

The Asian Paints' management commentary remained weak and recovery in demand could be gradual due to higher competitive intensity and weakness in urban markets, said Antique Stock Broking.

"Over the medium term, profitability would be restricted due to higher rebates/ promotions and marketing spends. Post the 3QFY25 performance, we cut our earnings estimates by 3-7 per cent for FY25-27. We maintain 'Hold' recommendation with a revised target price of Rs 2,361 against Rs 2,527 earlier, based on 45 times FY27 earnings," Antique said.

Amidst a slowdown in the decorative business, the management is focusing on scaling the industrial business. It expects good monsoon and likely boost in government spending to support rural demand. HDFC Institutional Equities has cut its FY26 and FY27 EPS estimates by 5-6 per cent to account for lower volume growth and maintained its 'ADD' rating with a target price of Rs 2,450 on the stock.

Systematix Institutional Equities suggested a target of Rs 2,870 on Asian Paints against Rs 3,015 earlier. The brokearge said Asian Paints is well-placed to counter the threat from new entrants and cement its leadership position in the industry with strong brand franchise, best-in-class OPMs and robust cash flows.