The paint sector has been an underperformer, with most listed majors shedding 24-30 per cent since their highs in August and September of 2022-23 (FY23). Except for AkzoNobel, paint companies have lagged behind benchmarks and peer indices on returns during this period.
Notwithstanding weak returns, brokerages believe there are multiple near- to medium-term worries for the sector, opening the way for further downgrades. These include weak October-December quarter (third quarter, or Q3) earnings, muted volumes, competitive pressures as new players enter the segment, and lack of valuation comfort.
The near-term risk for significant players remains a hit to sales emanating from demand woes. Market leader Asian Paints’ Q3 performance is indicative of this trend. Its three-year domestic decorative paint volume growth slowed to 16-17 per cent (from 19 per cent in the July-September quarter), on the back of a flat volume performance in Q3 due to
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