Shares of Asian Paints Ltd (NSE: ASIANPAINT) gained over 1.4% on 29th of February making a intraday high of ₹2930. The paint stock has been in a continuous downtrend since the last two months, even after reporting improved results.
Asian Paints have plummeted nearly 22% from its all time high of ₹3582 which the stock made in September 2022. Since then, the company can be seen trading in a range, forming a rising wedge pattern.
Rising wedge is a trend continuation pattern. As this pattern was formed after a bullish up move, we can expect the bullish trend to continue further if ASIANPAINT breaks out from its resistance area of ₹3400.
The paint stock is now trading near its 52 week low at price of ₹2821 per share. Asian Paints is financially a strong company. In the last quarter(dec 2023) the company reported a rise in net profit from ₹1097 crores to ₹1475. Their revenue also increased from ₹8637 crores to ₹9103 crores year on year.
Why ASIANPAINT is falling?
Even though ASIANPAINT reported improved results in the last quarter, its share price declined. There can be multiple factors for the decline of this paint company, like rising crude oil prices.
Paint sector and crude oil prices are directly related to each other, as rising oil prices lead to reduced profitability for paint companies, as this oil is a key ingredient in paints. In the last 2 months, the price of crude rose by 17%.
Another reason could be the emergence of new competition. Grasim recently revealed its entry into the paint business with ‘Birla Opus,’ aiming to become the second-largest paint producer in India, following closely behind Asian Paints.
Even though ASIANPAINT is a well established company, the new competitor will take some of their business affecting their revenue.
Should you buy ASIANPAINT at 52 week low?
The combined rating of multiple brokerages for ASIANPAINT is still upside. KR Choksey has given targets up to ₹3450 for this paint company. Looking at the company’s technicals, the stock seems to be taking support at 2800-2850 levels which is forming wedge support.
The stock has also experienced higher delivery quantity, 1.7x higher than the last one. Currently the company is trading near its VWAP which may act as a strong support. Even if the stock fails to sustain higher levels, in the short term, we can expect reversal and gains of nearly 15% in Asian Paints. If you are long term investors, Long term Ai forecast for Asian Paint might prove handy.
ASIANPAINT's Sale growth over last 5 years
| Time Period | Sales Growth Rate |
|---|---|
| 1 Year | 19.41% |
| 3 Years | 20.49% |
| 5 Years | 16.27% |
ASIANPAINT's Profit growth
| Time Period | Profit Growth Rate |
|---|---|
| 1 Year | 30.8% |
| 3 Years | 15.6% |
| 5 Years | 16.69% |
Final Words
ASIANPAINT is currenly at a strong support zone, which can bring an influx of buyers helping raise its share price. Combine that with higher delivery quantity by 1.7 times, we can learn investors are building new positions in its shares.
However, it will be important to track the company’s fundamentals and how they are able to tackle entry of new player in the market, as it is sure to take some of Asian Paint’s business.
