Shares of Asian Paints fell as much as 4 percent on Tuesday to an intraday low of Rs 1,512, its lowest since 25 March. It is the eleventh straight day of losses for the stock, its longest-ever losing streak.
The decline comes after Goldman Sachs points out significant risks for the company associated with sales growth.
The brokerage firm said that the slight improvement seen in paint demand in January and February was offset by the slump in March. Further, demand for the first two-quarters of FY21 (April-September 2020) will be impacted by lockdown and monsoon it said.
On expectations that consumers will likely push their re-painting plans given the macroeconomic slowdown amid COVID-19 outbreak, Goldman Sachs has forecasted FY22E and FY23 volume growth to be 1.5x real GDP growth (lower than the long-term average of 1.7x).
"We expect volume growth to slow to an average of 6 per cent over the next three years. We expect price/mix growth to be challenged (-4 percent in FY21E) due to price cuts and consumers down trading to the economy segment," it said.
It lowered its price target for Asian Paints to Rs 1,111 from Rs 1,387 earlier.
Meanwhile, ICICI Securities in its update on the paints sector said that the companies have increased cash discounts to dealers by 3.5 percent from the start of April 2020.
"Companies are providing extra discounts to dealers (depending on the size of dealers) to realise the cash as early as possible (to avoid the fear of any default)," it said.
It also said that the decline in oil prices, that benefits paint companies due to lowering of input costs, may take a lag of 45 days. The brokerage firm believes the major impact of benign raw material prices would be seen from October-December quarter onwards.