(Reuters) -Asian Paints’ shares slumped the most in over four years on Monday, as price cuts across its products and floods in some parts of India dented second-quarter sales volumes and dragged profit below analysts’ estimates.
The stock fell as much as 9.3% on the day to the bottom of the benchmark Nifty 50 index, and was set for its worst day since March 2020.
Asian Paints, India’s largest paintmaker by market share, has previously flagged weak demand for its premium products as inflation-hit shoppers choose cheaper alternatives.
To win them back, and with competition in the sector tightening following Grasim Industries’ entry, incumbents have been forced to cut prices.
Volume slowdown, market share loss and faster-than-expected scale-up for new entrants are key risks for Asian Paints, Morgan Stanley analysts said in a note.
Asian Paints on Saturday said profit nearly halved to 6.95 billion rupees in the three months ended Sept. 30, missing analysts’ estimate of 10.19 billion rupees, data compiled by LSEG showed.
Analysts at Jefferies were concerned about competition, saying it blurred the outlook, while Nomura added that overall sales for the company “will still look anaemic” despite sales volumes likely improving in the second half of this fiscal.
Its sales volumes declined 0.5%, trailing a 3.6% growth at peer Berger Paints and 4% at Kansai Nerolac.
Net sales fell 5% to 80.03 billion rupees, below the revenue estimate of 85.06 billion rupees. Berger Paints’ sales was largely flattish and Kansai posted a 5% drop, said Macquarie.
Out of 34 analysts covering the company, at least two downgraded the stock after results while two cut respective target prices, per LSEG data.
Berger and Kansai Nerolac shares declined 2.6% and 2.3%, respectively, on Monday.
(Reporting by Hritam Mukherjee in Bengaluru; Editing by Janane Venkatraman)
