What to do with Asian Paints' stocks post Q2 results ?

Asian Paints, one of the darlings of investors and in fact a true multibagger over years, has come up with impressive set of results for Q2 FY17. The company reported fourth consecutive double-digit volume growth in the September quarter owing to performance of its decorative paints segment.  The growth in volumes was in spite of the extended monsoon this year which dampens the sales for paints companies.

Owing to the pent-up demand paint stocks are always on investors watch list. Aided by good monsoon and festive demand the volume for Asian Paints is expected to be good.

Asian Paints has reported a growth of 18.1 per cent in consolidated net profits at Rs 496.76 crore on a YoY basis. The key risk for the stocks remains expensive valuations and the input cost may pose some risks to the margins as the crude oil prices inch up. Fresh investments at these levels in the stock do look a tad risky. The stock price may not have discounted the key risks and hence the stock at current valuation may possess risk reward ratio not in favour of investors.

The stock is trading at Rs 1100 per share , down by almost Rs 23 per share or 2.06 per cent on Thursday.