Why Asian Paint, Bajaj Finance, Avenue Supermart share falling | Good time to buy or avoid? #Finance

hey everyone let me start this CashNews.co with a quiz I would name three stocks and you need to figure out what is common among them stocks are baj Finance Asian pains and Avenue

supermar can you guess what is common among them well they all have three things in common first of all they are all leaders in the segment they operate second they’re all massive wealth creators for the investor and third these companies have not generated any return for the investors in

more than last 3 years in fact some of them have destroyed wealth and that is when the Indian Stock Market has seen one of the biggest bull rallies in the history if you look at baj none;">Finance it share price zoomed from Bonus split adjusted price of 5.75 in 2002 to levels of almost 8,021 that’s nearly 1,400 times return on investment so baj Finance is not

just a 100 bagger but a thousand bagger stocks in just 20 years however after touching the peak in October 21 baj Finance is currently at levels of around 6,500 in November 24th then look at

Asian pains it share price zoomed from around 1299 to more than 3522 creating around 300 times return but today it stock price is down more than 30% and now trading at December 20 levels avue supermar got listed in 2017 and it share price zoomed around nine times by October 21 but today it’s

down around 30% from those highs the question is what really went wrong is there a fundamental problem with these companies or is it a temporary issue because if it is a temporary problem this correction or consolidation could could be an opportunity isn’t it in my opinion this correction

with these three leaders is a great case study to understand how even the strongest of players can face challenges so let’s Deep dive to understand the reason behind the fall in these massive wealth creators of India before we discuss the reason for fall let’s quickly look at why these

companies created massive wealth in the first place so if you look at baj Finance it have one of the most underrated consumer lending segment of India way back in early 2000 when the sector

was in nent stage it started giving personal Loans Consumer Loans to White Collar employees of India and consumer lending has emerged as the fastest growing segment within lending in last 20 years of course it’s not just about tapping the market it’s

about execution they not only grew their business exponentially but also kept very high asset quality with low NPA look at the earning growth it was below th000 CR in 2015 and today it is more than 15,000 CR as a result baj #1a73e8; text-decoration: none;">Finance was the darling of every investor until a few years ago however the only problem with baj Finance was Valuation during the peak

company touched Price to Book of 12 which was exorbitantly high as compared to its historical median price to book so when Market gives such a high Valuation it expect the company to grow at much faster rate however off late there has been signs of slowdown in growth as compared to

the market expectation in recent Q2 result baj Finance net Profit growth was 14% versus Q2 of f24 mainly due to 77% jump in Provisions apart from slowdown and earning there

is a a concern around growing competition for Bajaj Finance geof financials has already announced its entry into consumer lending so due to slowdown and earning growth and increasing

competition and weak quarterly performance Market realized that it’s probably not worth paying such a high premium to the company as a result company’s Price to Book has now fallen to below levels of fire in my opinion Market has already factored in the negatives and current

Valuations are quite reasonable to consider baj Finance for longterm it has been a leader in consumer tring and would continue to dominate this fast growing space in the

longterm management has guided for 25 to 27% growth in a Profit growth in the range of 23 to 24% net NP in the range of 0.4 to 0.5% Roa in the range of 4.6 to 4.8% and Roe at 21 to 23% which is an excellent guidance yes there can be challenges in the near term that might result in

some more consolidation but current Valuation looks good to consider for long-term compounding then second name is Asian paints now Asian Paint has been an Undisputed leader in the decorative paint category of India they have such a strong brand that when you build a house you only

want the walls to be painted with Asian Paint even if you have to pay a premium for it because at the back of the Mind the thought processes you make house only once so you use the best product the dominance of Asian Paint can be gauged from the fact that in fi 24 it did a Revenue

of around 35,500 CR and Profit of around 5,558 CR where it’s its second biggest paint company which is buger paint did a Revenue of 11,200 CR and Profit of 1,170 CR so Asian Paint is almost three times the next competitor and has been

consistently growing its earning at an exceptional rate from 1160 CR in 2013 to 5558 CR in 24 and look at the consistency in growth there’s no single year where companies earning has deg grown except for covid and we all know that India is a growing economy with Rising demand for housing as

well as commercial building so demand for paint is only going to increase over time as a result everyone wanted a p Nation pain shareholding hence it always commanded a premium Valuation now here you can see the P ra of Asian Paint where it used to trade at P of around 5060 during

2015 till 19 but during covid there was sharp spike in the p ratio that’s mainly because Asian Paint share price zoomed during this phase but due to lockdown the earning growth fell down however even after that the Valuation traded at very high levels clearly those

Valuations were not sustainable and then there was was an announcement from ADI Billa group regarding for into the pain sector under the brand name bah opas ad Billa is the parent company of ultr cement which is India’s number one cement company so when you construct a

building you first need cement and then paint so it was a natural extension for ad B group graim has already spent 85% of rupees 10,000 CR kic laid out for B opas and is aggressively expanding across the country that has changed the game for the Indian paint industry because ad Thea is now eating

the market share of paint companies and to defend the market share paint companies like Asian Paint has taken a hit in their margin by adjusting the pricing and uh they’re being more aggressive on distribution as well as marketing and that has directly impacted the

Profitability and earning growth in the conall Asian pain management has clearly mentioned about taking price reduction and intense competition with higher discounts but this competition is not just the only negative factor for Asian Paint there are clear signs of slowdown in the

paint sector where Asian Paint has reported degrowth in volumes as a result Asian Paint posted one of the weakest number in Q2 with a sharp fall in net Profits even brokage houses downgraded Asian pains considering the competition and slowdown and that resulted in a sharp fall in

the share price interestingly today Asian pain p ratio is at levels of 50 which is one of the lowest level in last 10 years here the big question is is the worst already prized into the share price or there can be more pain ahead for Asian Paint so please understand that it’s a structural

change in the pain sector with intense competition from new and Trend that is clearly looking to eat the market share hence it’s not going to be easy for Asian Paint in the near term so for now Asian pains can be avoided but I’m sure this correction will eventually create a great buying

opportunity we’ll keep a close eye on the coming quarterly results to understand how badly this competition is impacting company’s performance and how the slowdown in the industry is impacting Asian pin performance in case you are a long-term investor but do not get enough time to track

the stocks or the market you can explore my weekly CashNews.co series where I spend 8 hours nearly a day tracking the key events in the economy and identifying potential opportunities in this series I also share my own investment strategy and stocks that I’m buying and selling from my own

Portfolio I also track more than 200 quarter results in an Excel tracker along with comments on each company for more details you can explore my website or the join button of my YouTube channel the next company is Avenue supermar the pent company of demart that has become a

household name in Gross business of India the biggest reason behind the success of Avenue supermar was its lowc cost pricing model it targeted one of the biggest segments within retail that included Grocery fmcg and essential household item apart from lowcost model it efficiently managed its

inventory supply chain owned the Real Estate rather than renting and focused on cluster-based approach for Market expansion and all these factors cumulatively resulted in exponential growth in company’s earning in last 10 years company’s net Profit has

compounded at 32% % rate on top of this there are many years of growth opportunity ahead of the company as retail is still largely an unorganized Market in India and there is emple scope for demart to continue the growth as a result it share price zoomed exponentially since listing and it always

commanded a very high Valuation however recently there is one major threat that has emerged for demart is the rise of quick Commerce Market that is disrupting the entire Commerce industry of India today you can order anything at your doorstep within 10 to 15 minutes in Metro cities

with just a few clicks and it has really disrupted the entire Grocery and household Market in India the catch is quick Commerce has just started it will continue to grow at an exponential rate and increase its penetration within the country that is not that quick Commerce will kill dmart business

in my opinion both offline and online grocery and household Market would continue to coexist as it is a huge market and there is ample scope for growth for multiple players how are the catches the rise of quick Commerce could potentially Dent the growth of demart for instance in Q2 companies

Revenue has grown at only 14% And net Profit growth is just 6% this slow down is also due to a very high Inflation in the country at the moment now the kind of Valuation Avenue supermar commanded it created a question mark in the

mind of investors the question is is it worth paying such a high PE to avue supermar especially when there’s a concern over Rising competition from Quick Commerce industry that’s where Revenue supermarket has witnessed a sharp fall recently with this correction its p

ratio has fallen to below 100 Levels but that is still quite High sure it won’t trade at a p of 2530 because of immense growth potential and a very Profitable business model but if quick Commerce can really impact demart growth there can still be more pain ahead at least I

don’t see any major recovery in the near-term at current Valuation so in this CashNews.co we discuss the reason behind fall in share price for three massive wealth creators of India baj text-decoration: none;">Finance Asian pains and Avenue supermar interestingly they all have have three common reason for fall in share price first factor is recent slowdown in the industry second is rising competition uh both these factors resulted in fall in Revenue and net

Profit growth in of the companies and third reason is the expensive Valuation when the earning growth reduced investor book Profit as the Valuations were too high for the performance they’ve shown now that there’s a

good correction all three of them are already trading much below their median Valuation going forward I believe that all three companies would continue to dominate Within the respective sector the only risk is the rising competition and these leaders how they tackle the competition

but that is something that only time will tell now tell me in the comments what do you think about the future of baj Finance Asian pain and Avenue supermar is this correction an opportunity

to add them or there can still be more pen head if you find this CashNews.co useful do share with in your circle I’ll see you next CashNews.co till then take care