Asian Paints share price continued its freefall this year, moving to its lowest level since March 2021. It has crashed by over 32% from its highest level in September this year and 35% from its all-time high. So, is the Asian Paints stock a good investment in 2025?
Why Asian Paints stock has crashed
Asian Paints and other top paint companies have retreated sharply this year. For example, Berger Paints has dropped for five consecutive weeks and is hovering near its lowest level since June 3. Grasim Industries has also fallen for three straight weeks.
Asian Paints stock has crashed as its growth momentum and margins wane. The company’s most recent results showed that its revenue dropped to ₹78.52 billion in the quarter ending June 30th, a big decline from the ₹80 billion it made in the same period last year.
Asian Paints profitability also continued to wane during the quarter. The profit for the period moved to ₹11 billion from ₹15 billion a year earlier.
The company’s revenues have declined in a market that is still expected to grow in the next few years. A recent report by CareEdge estimated that the sector would grow by between 8% and 10% as the construction boom continues.
The challenge, however, is that the industry is becoming highly competitive. Firms like Nippon Paints, Sherwin Williams, Akzo Nobel, and Jotum have established bases in the country, boosting competition.
Asian Paints has, therefore, been forced to boost its marketing budget, which has narrowed its operating margin. As such, analysts believe that the company will continue being less profitable in the foreseeable future.
With competition intensifying, the company has also been forced to slash prices to maintain its edge across all its segments. Cutting prices helped the company to see a volume growth of about 7%, which was healthy, but lower than its goal of having double digits.
The management also blamed the country’s elevated inflation for impacting demand. India’s inflation has forced the Reserve Bank of India (RBI) to maintain higher interest rates for longer than in other countries.
Asian Paints stock is also highly overvalued despite the recent stock plunge. It has a price-to-earnings ratio of 47, higher than the industry average od 42. These are huge numbers considering that Sherwin Wiliams, the biggest player in the sector has a multiple of 34. Its multiples are also higher than other tech firms like Google and Microsoft.
On the positive side, Asian Paints’ business is still doing fairly well despite the new challenges, meaning that an uptick is still possible in 2025. The stock may rebound if the company demonstrates that it can handle the competition well.
Asian Paints share price analysis
The weekly chart shows that the Asian Paints stock price has been in a strong freefall in the past few weeks. It has dropped in the past 16 consecutive weeks, its longest streak on record.
The stock dropped below the key support level at ₹2,510, its lowest level in June 2022. It is also about to form a death cross as the 50-week and 200-week Exponential Moving Averages (EMA) cross each other.
Therefore, the short-term outlook for the stock is bearish, with the next point to watch being ₹2,000. The stock will then bounce back in 2025 when it demonstrates that it can grow profitably during the year.
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