Asian Paints Q1 Preview | Net profit likely to rise 35% on lower input costs

The prices of key raw materials, used in the paints industry, like titanium dioxide, acetic acid, and China titanium dioxide have fallen leading to an improvement in EBITDA margins for Asian Paints.

Asian Paints is expected to report a consolidated net profit of Rs 1,337.2 crore for the June quarter, up 35 percent on-year and 10.8 percent on-quarter, according to the average of estimates of four brokerage firms. The paints major will announce its quarterly earnings on July 25.

Its consolidated revenue is pegged at Rs 9,341.5 crore, up 8.3 percent over the last year and up 6.3 percent over the last quarter. Operating profit margin or earnings before interest, taxes, depreciation and amortisation (EBITDA) margins are seen at 21.17 percent, up 395 basis points year-on-year and 72 basis points sequentially.

Domestic volumes for Asian Paints are likely to jump 9.3 percent in Q1FY24 over the same period a year before. Easing raw material prices and a decent growth in volume sales have been the key drivers of the quarterly performance.

The prices of key raw materials, used in the paints industry, like titanium dioxide, acetic acid, and China titanium dioxide, have fallen, leading to an improvement in EBITDA margins for Asian Paints. According to Incred Research, titanium dioxide prices have reduced 12 percent on-year in Q1FY24. Titanium dioxide provides opacity, whiteness, and brightness to the paints. Prices of acetic acid and China titanium dioxide have reduced 26 percent and 28 percent in Q1FY24 on a year-on-year basis.

Kotak Institutional Equities expects moderation in growth of putty and commodity products for Asian Paints. It also expects a 7 percent growth in Asian Paints subsidiaries.

“For Q1FY24, we expect Asian Paints to see a good margin recovery, but year-on-year sales and volume growth would be a bit dull due to a high base,” said Nuvama Institutional Equities in its Q1FY24 preview. The brokerage firm further said that April and May recorded decent growth, but the high base is a challenge. High base refers to the time when companies recorded a huge surge in sales after the pent-up demand for Covid-19. Matching this high base is difficult for Asian Paints.

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