Asian Paints Ltd is an Indian multinational paint company, headquartered in Mumbai which was set up in 1942. The company is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related to home décor, bath fittings and providing of related services. The company manufactures varnishes, enamels or lacquers, surfacing preparation, organic composite solvents and thinners. Asian Paints is India’s largest and Asia’s second largest paints corporation.
Asian Paints is the holding company of Berger International. The company’s manufacturing operations encompass 15 countries of the world including India, with considerable presence in the Indian subcontinent and the Middle East. The company has 26 paint manufacturing facilities in the world serving consumers in over 60 countries.
Quarterly Growth Walkthrough
Asian Paints has reported a poor 6 percent growth in consolidated net profit for the third quarter at Rs 1,097.06 crore. The company had reported a profit of Rs 1,031.29 crore in the corresponding quarter of the previous fiscal year.
Consolidated revenue from operations was reported at Rs 8,637 crore, which is up by a fractional 1.3 percent from Rs 8,527 crore in the corresponding year-ago quarter.
Amit Syngle, the Managing Director & CEO of Asian Paints said in a statement, “The domestic Decorative Business registered a flat volume and value sales delivery for the quarter, on a very high price increase base in the previous year. The extended monsoon in October also affected retailing in the peak festival season; but demand picked up in November and December leading to a double-digit growth for the Decorative Business in December. The operating margins improved strongly on sequential basis as well as saw an improvement on a y-o-y basis driven by deflation in some of the raw material prices as well as continued work on driving operational efficiencies across businesses.”
Segment wise Performance
Asian Paints stated in its BSE filing report that its industrial business had a good performance supported by rigid growth in the Auto OE and general industrial segments. However, the international business has shown good performance in the Middle East and Africa while the South Asia market, especially Sri Lanka and Bangladesh have shown extreme deterioration due to the adverse forex and macro-economic conditions.
The sales of its international business have risen by a mere 2 percent to Rs 778 crores from Rs 762 crore. Sales increased by 13 percent in terms of constant currency.
The Home Décor market has pursued its expansion but has faced a slight slowdown in the Bath and the Kitchen business for the last quarter.
Bath Fittings business’ sales decreased by 1 percent year on year to Rs 90 crore whereas sales for kitchen business decreased by 7 percent YoY in at Rs 100 crores.
Technical Analysis
Asian Paints share price has made a head and shoulders candlestick pattern on the weekly chart. You can observe the swing highs for identifying this pattern which gives us an inference that the price level at Rs 3600 is a heavy resistance band. The share price has taken support twice at the retracement level of 38.2% at Rs 2645 which displays a strong support band for the stock. You can observe the swing lows at the 38.2% retracement level wherein the price approached the 200-day exponential moving average. The stock price of Asian Paints has forever been bullish as it is a favourite pick of mutual fund managers, hence the price always rebounds when it approaches the 200-day average.
We can observe the stock has been on a correctional dive since the month of September 2022 and the price is rapidly approaching the moving average and the 38.2% retracement level. Therefore, investors may begin accumulation of the stock and may acquire the stock in bulk quantities at the 38.2% retracement level. We get a confirmation of the stock being highly oversold as the weekly MFI is at 22 points.
Long term investors should capitalize on this amazing opportunity as Asian Paints is a large cap company currently ranked 21st by market capitalization in the Nifty 50 list.
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