Asian Paints touches new high as oil slump

The stock up 4% to Rs 838 on National Stock Exchange.

Asian Paints has rallied 4% to Rs 838 on National Stock Exchange (NSE) as oil fell 5% to its lowest in nearly six years on Monday.

Analysts expected that the fall in crude oil prices would benefit paint companies, which use crude oil derivatives as inputs. Raw materials account for over 50% of a paint company’s total expenses.

“Asian Paints is expected to report 12.5% volume growth, driven by Tier 2 and Tier 3 cities for the quarter ended December 2014. Correction in TiO2 and Crude oil prices would enable around 300bps higher gross margins year-on-year (YoY).  We estimate 16.8% sales growth and 25.3% EBITDA growth led by 110bps margin expansion and 34.4% PAT growth YoY”, analyst at Prabhudas Lilladher said in a result preview.

The stock opened at Rs 813 and touched a high of Rs 842, also its fresh record high on NSE. Till 0956 hours, a combined 941,947 shares changed hands on the counter on NSE and BSE.