Festive Season Leads to Paint Stocks Rebound

Despite the Covid-19 pandemic and the consequent sharp slowdown in economic activity, leading paint makers have seen a solid rebound and some are hovering near record high levels. Festivals tend to usher in good times for most consumer segments in India – both essentials and discretionary. Within the discretionary segment, paint stocks have usually seen a seasonal run up every festival season. While Covid-19 has badly destroyed the demand environment across segments, investors are still seem to be betting on the paint makers to do an encore. Sectoral leader Asian Paints remains analysts’ favourite stock in the pack, but they are divided on the near-term prospects of its peers. Asian Paints hit a new all-time high of Rs 2,015 on August 25, rising 9.5 per cent year to date and 38 per cent from its March lows. The stock traded at Rs 1,954 on Tuesday. The closest peer Berger Paints trades at Rs 542, but is 6 per cent away from its record high hit in February. The stock is up 9.2 per cent so far this year. Asian Paints has rallied 621 per cent over last one decade, and Berger Paints 1,663 per cent. For the relatively smaller players, the story is a bit different though. Kansai Nerolac and Shalimar Paints are down 8 per cent and 10 per cent respectively, for the year to date, while Akzo Nobel is up 8.5 per cent. These stocks need to gain 15 – 67 per cent to reach their all-time highs. The paint industry consists of a mix of organised and unorganised players, but the first group holds the biggest market share. Till fiscal year 2017, the organised players had a market share of about 65 per cent, which rose to 80 per cent post GST implementation. The top players in the organized sector are Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel, which together account for about 68 per cent of the market share.