Asian Paints Q3 Result: Revenue from operations, already increased by 26% 38,527 crore for the reporting period
Asian Paints 3 Q3 profit down 18%; Margin high input costs take a hit
Asian Paints Limited reported consolidated net profit on Thursday 31,015 crore for the December quarter, down 18% 31,238 crore was reported in the same quarter last year.
Profit figures have seen a steep jump due to last year’s low base.
Asian Paints Earnings 2022 (Q3): Highlights
Revenue from operations, has already increased by 26% 38,527 crore as against the reporting period 36,788 crore during the same period last year.
On a year-to-date basis, the company’s shares have risen 14% to date, while the benchmark BSE Sensex has moved 9% over the same period.
Amit Singel, MD and CEO, said, “Profitability across the business was supported by various cost control measures actively followed by mild raw material prices and management.”
“After a complete shutdown in April 2020 due to the extended lockdown, the decorative business segment has witnessed an improvement in business conditions over the next 2 months. Thus, in June 2020 the business registered a healthy volume growth.
In India, the company has witnessed two industrial coverage business and home improvement department along with other business departments.
Paints’ revenue fell 42.6% to Rs 2,871 crore in the quarter. Compared to the same period last year, EBIT in the segment has declined by 65 per cent to Rs 371.6 crore. And the margin has shrunk to 840 bps 12.9% YoY.
See, overall earnings for the quarter were also supported by lower other and tax costs (lower 75.5% YoY).
Sharekhan has made a ‘buy’ call to Asian Paints with a target price of Rs 3,550. “The gradual softening of input prices, price increase of 3-4%, better blending of products and delivery efficiency will help reduce the gross margin pressure. It is expected to stand at 21% in FY2022. “
Further, the company’s management expects the double-digit volume growth in decorative paints to continue for the medium term, driven by 1) strong growth in the Tier-3 and Tier-4 markets (as customers shift to branded products and upgrade emulsions). From), 2) Expansion of a product portfolio that creates more options for urban consumers to improve their homes and 3) Waterproofing and undercoats gain strong traction due to low quality construction. It will be well supported by the home improvement business, which is basically focusing on the whole home decor game. Furthermore, the industry and automotive paints are expected to see a strong recovery in demand in the coming quarters.
Yes Securities, on the other hand, added that the stock has seen a strong outperformance and is now trading at an all-time high valuation multiple of 68 times FY23 and 59 times FY24 agreed earnings. While strong demand outlooks and pricing activities in the near term may help sustain premium valuation of margin recovery, there is limited room for positive surprises.
“Further increase in material inflation and diversification of margins due to diversification may otherwise pose a risk of impeccable execution. Due to the limited perfect uptrend, we do not recommend aggressive buying at current levels, ”said the brokerage.