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Asian Paints, a leading paint manufacturer in India, experienced a significant drop in its share price, plummeting by 9.5% to reach a new 52-week low of Rs 2,506, following a sharp decline in its net profit for the second quarter of fiscal year 2025 (Q2 FY25). This decline, attributed primarily to weak demand, saw the company's net profit shrink by 42.4% to Rs 694.64 crore compared to the same period last year.
The company's net sales for Q2 FY25 also took a hit, falling by 5.3% to Rs 8,003.02 crore. This decline was influenced by several factors, including persistent rains throughout the quarter and floods in certain regions of the country. The volume of decorative paints sold in India, a key segment for Asian Paints, also experienced a marginal decrease of 0.5%. The company attributed the revenue impact to price cuts implemented last year, a shift in product mix, and increased rebates offered to customers.
The Q2 performance stands in stark contrast to the company's Q1 results, highlighting a further deterioration in its financial health. Sequentially, the profit fell to Rs 1,169.98 crore in Q1 FY25, marking a 24.54% year-on-year decrease compared to Rs 1,550.37 crore in the previous year. Revenue from operations also declined by 2.32% to Rs 8,969.73 crore in Q1 FY25, compared to Rs 9,182.31 crore in the corresponding period of the previous fiscal year. The company's consolidated net sales for Q1 FY25 decreased by 2.3% year-on-year to Rs 8,943.2 crore from Rs 9,153.8 crore in Q1 FY24.
The stock of Asian Paints has been on a downward trend, losing 12% in the last five trading sessions. This decline extends further back, with the stock shedding 16% in the past month and over 11% in the last six months. Year-to-date, the stock has plummeted by 25%, and over the past year, it has fallen by 17%. In contrast, the Nifty 50, a benchmark index representing the top 50 companies listed on the National Stock Exchange of India, has shown a more positive performance, rising 1% in the last five days. However, the index has also experienced a decline of 3% in the past month. Over a longer timeframe, the Nifty 50 has risen 9.6% in the past six months, delivered a 12% return year-to-date, and gained 25% in the last year.
The sharp decline in Asian Paints' Q2 profit and subsequent share price drop signal a challenging period for the company. Weak demand, price cuts, and changing consumer preferences have all contributed to this performance. The company's ability to navigate these headwinds and regain its market share will be crucial in determining its future trajectory. The stock's performance will continue to be closely watched by investors seeking insights into the broader trends within the paint industry.
Source: Asian Paints shares slump over 9% after sharp decline in Q2 net profit