Financial services firm PhillipCapital (India) has put a buy call on Asian Paints and set a target price of Rs 3,400.

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"Strong brand equity, an extensive distribution network, and a well-diversified product portfolio and its ability to quickly ramp up business within adjacent categories (waterproofing, construction chemicals, putty) make it a "Must-own" company within one’s portfolio," PhillipCapital (India) said.

The firm expects healthy consumer demand in the paints industry on the back of a pick-up in projects business, normal monsoon pick-up in real estate activity and a significant ramp-up in new businesses.

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PhillipCapital (India) also sees a gradual improvement in operating margins in Asian Paints as the company initiates cost-efficiency measures. Asian Paints is likely to deliver operating margins by fiscal 2024 similar to that seen in fiscal 2020, the financial services firm said.

Meanwhile, the country’s leading paint company reported a 28.2 percent dip in consolidated net profit at Rs 595.96 crore in the July-September quarter from Rs 830.37 crore in the same period last year due to a rise in raw material prices.

"Steep inflation seen in raw material prices, since the beginning of this calendar year, has been phenomenal and has impacted gross margins across all businesses in the quarter," Amit Syngle, managing director and CEO of Asian Paints, said in a press statement on Thursday.

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However, the company’s consolidated revenues increased 32.6 percent to Rs 7,096 crore from Rs 5,350 crore as a result of higher volume growth by the domestic decorative business.

On the Bombay Stock Exchange, shares of Asian Paint hit an over two-month low of Rs 2,912 on Friday. The stock closed at Rs 2,984.65, down by 0.63 percent from its previous close of Rs 3,003.50.

(Edited by : Jomy Jos Pullokaran)