Diwali is around the corner, and it is the time when a majority of Indians look to paint their houses as a gesture of good luck. For investors, this is the time to look toward paint stocks that generally surge around this time, which contributes majorly to their revenues. One such stock is Asian Paints, a household name selling the best paints in India. However, with new major competitors such as Birla Opus from Aditya Birla Group entering the market, it becomes important to re-visit and analyse Asian Paints as a viable investment.

• Asian Paints is the biggest paint manufacturing company in India, with a market share of 59%.
• It manufactures wall paints and waterproofing solutions and provides services such as interior design.
• Being the biggest paints manufacturer, Asian Paint’s stock can offer good returns based on its financial performance.

Asian Paints Ltd is an Indian paints manufacturing company with its headquarters in Mumbai, Maharashtra. The company is one of the leading paint manufacturers and provides related services. It manufactures products such as wall paint, wallpapers, waterproofing products, wood and metal paints, wall stickers, adhesives, and painting tools. Along with these products, it also provides services such as painting, waterproofing, interior design, and wood solutions. In India, Asian Paints is still the market leader as of September 2024, with a $36 billion valuation, making it the 549th most valuable company by market cap.

Investors like Asian Paints because of its high promoter holding, which is currently 52.63%, indicating that promoters still have confidence in the stock. The company currently has an enterprise value of Rs. 3,10,004.13 crores and very little debt, at only Rs. 53.44 crores. Retail and other investors hold 19.75%, while foreign investors hold 15.27% of ownership through stocks.

Market position

As of 2023, Asian Paints was the market leader in India, with a 59% market share. It was followed by Berger Paints, which had an 18% market share, and Kansai Nerolac Paints, which had a 15% market share.

Distribution network

Asian Paints has a strong distribution network and a reported 1.5 lakh retail points, adding about 6,000-10,000 retail points in Q1 of 2024. It has one of the largest dealer networks in India, with over 70,000 dealers, the next one being Berger Paints, with only 25,000 dealers.

Product pricing

Asian Paints offers paints in all price segments. Its heavy technological investments have allowed it to offer higher-quality luxury paints, contributing significantly to its revenue.

Range of products

The company offers a wide range of products, such as wall paints and wallpapers, and also provides services such as interior design and waterproofing. Its wide range of products helps it stand out from its competitors.

Decorative paints

Apart from its economy range of paints, the company also earns high revenue from its premium and luxury range of products such as Royale Health Shield, Royale Aspira and Royale Atmos.

Industrial paints

Asian Paints also offers industrial paints, mainly industrial coatings, resins, protective coatings, and powder. These products cater to big industries such as automobiles and metal components and help Asian Paints earn additional revenue.

Financials

Asian Paints announced its financial results for the April-June quarter on July 17th, 2024. The company reported a drop in its consolidated net profit, which was down 24.6% to Rs. 1,170 crore, compared to Rs. 1,3,83 crore it earned in the corresponding quarter last year. The total revenue from operations also dropped 2.3%  to Rs. 8,943 crore, down from Rs. 9,154 crore in the corresponding quarter last year. The negative financials raise concerns for investors.

Stock concerns

The Asian Paints stock has a 52-week high of Rs. 3,422.95 and a 52-week low of Rs. 2,670.10 and has only provided 0.46% returns to investors in the last year. Although the 6-month returns are 14.82%, the recent negative financials raise concerns for the stock, which may fall in price due to the weak financials.

Here are some prospects for the Asian Paints stock:

• If the company doesn't perform well in the next quarter, the weak financials can result in a stock price fall.
• Population growth and rapid urbanisation can help the company increase its revenue if it tackles its competitors efficiently.

Analysis of Asian Paints stock is important if you are a current shareholder or are looking to buy a share. The company has the largest market capitalisation and distribution network but has not performed well financially in the last quarter. Before investing, analyse the current financials of the stock and match them with your investment goals and risk tolerance.