Asian Paints: Fading into the blue?

Is the best over for Asian Pains on Dalal Street? The stock fell 4.3 per cent in the last two days after the company's Q1 earnings were below market expectations.

Although the decline in the stock has been moderate so far, its prospects remain bleak in the near term, analysts said, with eight brokers -- double the number in May -- recommending a 'sell' after the results, according to Bloomberg. The stock had zoomed 44 per cent so far this year on the firm's steady volume growth and inclusion in the Nifty.



While profit after tax grew around 9 per cent YoY, missing analysts' expectations by nearly 10 per cent, the volume decline shocked investors. The subdued volumes outlook due to a weak demand environment has failed to justify high valuations, analysts said.

Asian Paints, trading at nearly 30 times estimated FY13 earnings, is one of the most expensive paint stocks in the world. Citi has reiterated its sell rating and lowered its target price to Rs 3,425.