Shares of Asian Paints slipped 2 percent intraday on Monday due to price cut worries. Kotak has retained a reduce rating with a revised target of Rs 830 per share. The brokerage says that valuation of Asian Paints is quite expensive.
The paint company has cut prices by 2 percent across its decorative portfolio. Kotak finds this price cut move a tad surprising in the backdrop of the surge in several key paint inputs over the last few months. Hence, factoring in a price cut, Kotak has slashed FY2017-18 earnings per share (EPS) by 3-5 percent.
“We continue to bake in strong volume growth but find valuations at 35X FY2018 EPS expensive,” it says in a report.
In an interview to CNBC-TV18, Asian Paints said price cut was reduced due to lower commodity prices. The company does not see any volume pick-up post price cut and expects margins to reduce by 200 basis points.
At 13:27 hrs Asian Paints was quoting at Rs 855.25, down Rs 19.65, or 2.25 percent on the BSE.
Posted By Nasrin Sultana
Follow @ NasrinzStory