Paint inventories are piling up on rising price reports; Asians, Berger paints earn up to 6%

Shares of paint companies gained as much as 6 percent on BSE in Wednesday’s intra-day trade in a market otherwise limited by reports of rising prices.

Asian Paints rose 6 percent to Rs 3,145.60, while Berger Paints India gained 5 percent to Rs 767.80, followed by Shalimar Paints (5 percent to Rs 95.75), Kansai Nerolac Paints ( 4 percent at Rs 592), Indigo Paints (3.5% at Rs 2,470) and Akzo Nobel India (3% at Rs 2,148) on BSE in intraday trade. By comparison, the S&P BSE Sensex was up 0.24% to 61,496 points as of 9:50 am.

Those stocks had fallen as much as 15% from their respective 52-week highs following the publication of disappointing margins for the quarter ended September 2021 (T2FY22).

Paint companies Asian Paints and Berger Paints have raised single-digit prices across their portfolio to offset rising input costs, Moneycontrol reported citing a brokerage report. This is the biggest price increase ever recorded by these companies.

According to Kotak Institutional Equities, Asian Paints, the market leader in the decorative paints segment, has increased prices by 7-10%, effective November 12. While Berger Paints has also raised prices by multiple digits, Edelweiss said adding that other companies may follow suit soon, the report suggests.

In the last two trading days, the market price of Asian paintings has gained 10% from its five-month low of Rs 2,855.60 reached on Monday, October 25, 2021. It has corrected 15% from its five-month low of Rs 2,855.60 reached on Monday October 25, 2021. It has corrected 15% from its 52-week high as the company reported 28.2 year-over-year percentage decline in consolidated net profit to Rs 595.96 crore in Q2FY22, due to higher costs of operation.

While announcing second quarter results last week, Asian Paints management said the company has taken a series of price hikes and will consider another price hike to mitigate the impact of this still high inflation and is confident that the company should be able to turn this around strongly over the next quarter.

Growth momentum remained strong as Asian paints significantly outperformed most competitors in terms of volume / sales growth. Bullish comments, aggressive initiatives on portfolio and distribution expansion and recovery in construction / industrial demand offer good prospects. With input inflation returning to its peak, FY21 margins look tough, analysts at Emkay Global Financial Services said in the earnings update.

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