Asian Paints Q3 preview: Festival demand may lift net profit up to 30%; robust volumes eyed

Asian Paints announces Q3FY24 results.

Asian Paints is likely to post healthy Q3FY24 results, growing revenue in high-single digits and net profit in double digits year on year, led by a demand rebound amid a delayed festive season falling during the quarter.

Analysts predict Asian Paints’ Q3 net profit to grow as much as 30 percent on-year. The paint major will share its October-December quarter earnings report on January 17.

Asian Paints will likely deliver revenue growth of around eight percent, led by the low base as well as the upsurge in the real estate sector. The company is likely to clock Rs 9,200-9,330 crore in revenue in the October-December quarter, up from Rs 8,636.7 crore in the same quarter a year ago, according to three brokerage estimates.

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The adjusted PAT is likely to see a jump of up to 30 percent to Rs 1,425.7 crore, according to Prabhudas Lilladher. Other brokerages peg the adjusted PAT at Rs 1,230-1,336 crore, with a year-on-year rise between 12 and 25 percent.

Asian Paints Q3 Preview

Volume growth eyed, margins seen expanding

Asian Paints’ volume growth is projected to come in at 11-13 percent, according to most analysts, as a result of increased demand due to the delayed festive and wedding season, along with price cuts. Demand was stronger in October and November, with December seeing more muted numbers.

However, Elara Securities shares a contrarian view. Higher input costs, currency fluctuations and weak consumer sentiments after Diwali will weigh on the firm, it said. The combined sales volume for October and November would likely be in a mid-single digit, said the brokerage.

The gross and EBITDA margins are predicted to expand due to a correction in key raw materials and a favourable product mix. Nuvama Institutional Equities said, "The EBITDA margin shall expand by 184 bps YoY to 20.5 percent." According to Prabhudas Lilladher, the gross margins are expected at 43 percent due to a softer commodity basket and lower input prices.

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Asian Paints stock call

Elara Securities retained a 'top sell' rating on Asian Paints, saying that contrary to expectations of a recovery during the festival and marriage seasons, demand for paints will be weak in Q3. The brokerage has a negative outlook for the sector as a whole, believing that EBITDA margins are likely to drag as firms compete for market share and attempt to drive volume growth.

Motilal Oswal has maintained its 'neutral' rating on Asian Paints stock, with a target price of Rs 3,340 apiece. "We remain cautious as the paints segment may not enjoy higher multiples of the past," said the brokerage in a note. Its target price implies a mere two percent upside from the closing price of Rs 3,277.8 on January 12.

Prabhudas Lilladher had an 'accumulate' call on the scrip, with a price target of Rs 3,466 per share.

Over the past six months, shares of Asian Paints have fallen around 5.21 percent. In comparison, the frontline index, Nifty 50 has risen around 11 percent. The scrip settled flat on January 15 at Rs 3,280 on the NSE.

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