Paint Stocks to Buy Now for an Upside of 42%; Recommended by Macquarie

SYNOPSIS: Rising crude oil prices are pressuring paint companies’ margins, prompting price hikes. While strong players may manage costs better, brokerages remain cautious due to persistent input cost pressures and weak near-term demand visibility.

Crude oil plays a crucial role in the paint industry, as a significant portion of raw materials used in manufacturing are derived from petroleum-based products. As a result, any sustained increase in crude oil prices tends to put pressure on input costs, which can weigh on margins and, in turn, impact investor sentiment toward paint companies. Since crude derivatives form a key component of production, higher oil prices are generally seen as a negative for paint manufacturers, especially in the near term.

According to global brokerage Macquarie, the outlook for the paint sector currently appears mixed. While companies have started implementing price hikes of around 2-3 percent (effective from 25th March) to offset rising input costs, the brokerage believes that margin pressures are likely to persist in the near term.

Berger Paints has also indicated the possibility of a second round of price increases in April, depending on how raw material costs evolve. However, Macquarie highlighted that despite these pricing actions, elevated crude prices may continue to keep cost pressures high in the coming months.

Asian Paints Limited

With a market cap of Rs. 2.1 lakh crores, shares of Asian Paints Limited closed in the green at Rs. 2,195.25 on Friday, up by around 0.4 percent, as against its previous closing price of Rs. 2,186.55 on BSE. Global brokerage firm Macquarie maintained an “outperform” rating with a target price of Rs. 3,100 per share, implying an upside of about 42 percent from its previous closing price.

Macquarie has maintained an “outperform” rating on the stock, citing its strong brand equity and extensive distribution network. The brokerage believes the company is better positioned to pass on rising costs over time and could benefit from a gradual recovery in margins.

Berger Paints Limited

With a market cap of Rs. 48,587.3 crores, shares of Berger Paints Limited closed in the green at Rs. 416.7 on Friday, up by around 2 percent, as against its previous closing price of Rs. 409.55 on BSE. Macquarie maintained an “underperform” rating with a target price of Rs. 410 per share.

This “underperform” rating of the brokerage points to challenges such as earlier price cuts, weak urban demand, and slower growth in key markets. While recent price hikes may offer some support, the brokerage expects the benefits to be gradual and insufficient to fully offset cost pressures in the short term.

Kansai Nerolac Limited

With a market cap of Rs. 13,498.3 crores, shares of Kansai Nerolac Limited closed in the red at Rs. 166.95 on Friday, down by around 1 percent, as against its previous closing price of Rs. 168.6 on BSE. Macquarie maintained a “neutral” rating with a target price of Rs. 220 per share, implying an upside of more than 30 percent from its previous closing price.

Macquarie has maintained a “neutral” stance, noting that valuations appear reasonable after recent corrections. However, the brokerage flagged limited near-term earnings visibility, driven by ongoing cost pressures and muted demand across certain segments.

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