Brokerage firms remained bullish on Asian Paints but slashed their target price for the stock after the company missed Street estimates in its March-quarter results. The company reported a 1.7 percent year-on-year (YoY) drop in consolidated net profit of Rs 487 crore for the fourth quarter ended March 2019. In the corresponding quarter last year, the company posted a consolidated net profit of Rs 496 crore. CNBC-TV18 poll estimated profit of Rs 570 crore.

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The margin for the quarter fell 230 bps to 16.4 percent as against 18.7 percent (YoY). The margin was expected at 18.4 percent for the quarter.

According to KBS Anand, managing director, and chief executive officer at Asian Paints, high raw material prices and marketing spend in the fourth quarter affected the margins.

Revenue from operations increased 11.7 percent YoY to Rs 5,018 crore in Q4 from Rs 4,492.30 crores with decorative business registering double-digit volume growth in India.

Here’s what brokerage firms recommend on Asian Paints:

CLSA | Rating: Sell| Target cut to Rs 1285 from Rs 1400

The brokerage remained 'sell' on the stock and reduced its target price to Rs 1,285 from Rs 1,400 earlier.

CLSA said the Q4 results were an all-around miss due to revenue and margin miss and the management maintained a cautious outlook. Even though the domestic volume growth at 10 percent was good, value growth was impacted by an inferior mix, it added.

CLSA believes that increased input prices and higher marketing spend impacted the margins. The brokerage further reduced EPS estimates by 1-3 percent for FY20-21 after a 2-5 percent cut in April 2019.

Morgan Stanley | Rating: Overweight | Target Price: Rs 1,600

The brokerage maintained its 'overweight' call on the stock and target at Rs 1,600 per share.

According to Morgan Stanley, International business and automotive coating remained a challenge this quarter. The company also cautioned against growth uncertainty in the near future. The brokerage suggests no price hike in the near-term if raw material prices sustain.

Macquarie| Rating: Outperform| Target cut to Rs 1,470 from Rs 1,580

According to the brokerage, the key positive from this quarter was the continuation of double-digit volume growth, however, the key negative was margin pressure due to higher A&P spend, and provisions.

"Like company's dominant market share in the Indian paint industry," it added.

The brokerage maintained its 'outperform' rating but reduced its target price to Rs 1,470 from Rs 1,580 earlier.

Credit Suisse| Rating: Neutral| Target cut to Rs 1,425 from Rs 1,500

Credit Suisse maintained its neutral rating but the stock's slashed target price to Rs 1,425 from Rs 1,500 earlier.

The brokerage said that the company recorded healthy volumes at the cost of a large margin miss and slashed the company's FY20/FY21 EPS estimates by 6-9 percent.

It believes the margin hit was on high discounting and rise in fixed costs from new capacity. "The volume growth was healthy, but realisation growth was only 2 percent compared to the price hike of 6 percent," it said.

Deutsche Bank| Rating: Buy| Target: Rs 1,600

The brokerage has a 'buy' rating on the stock and target at Rs 1,600 per share. Even after an in-line volume growth, the company's value growth grew below-estimates at 12 percent, the brokerage said.

It expects the company to take further price hikes with rising input costs and margin pressure due to the commissioning of new plants.

Deutsche Bank forecasts a sustainable medium-term improvement in paint demand

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