Asian Paints is expected to clock around 45-70 percent year-on-year growth in consolidated profit after tax for the quarter ended June 2022 on significant growth in topline and operating performance. A low base is also expected to support earnings as the June quarter of the previous year was hit by the second Covid wave.
Brokerages expect strong volume growth with healthy realisation, which may push revenue growth higher by 30-50 percent compared to the year-ago quarter. The operating profit growth could be more than 50 percent due to strong topline for the quarter and low base of last year.
"We expect 35 percent and 54 percent YoY growth in volumes and value in domestic decorative paints aided by continued market share gains, focus on economy-end products and price hikes (up 25 percent YoY). We expect 34 percent YoY growth in subsidiary revenues," said Kotak Institutional Equities, which sees 73 percent growth in profit and 51 percent in revenue.
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Asian Paints' strong growth outperformance versus peers such as Berger Paints, Kansai Nerolac Paints, and Akzo Noble would continue, the brokerage said.
Analysts at ICICI Direct expect Asian Paints to report consolidated revenue growth of 31 percent YoY on a favourable base and higher realisation (up 22 percent YoY) in Q1FY23.
"Market share gains and launches of new products will help drive volume up by 8 percent for the company during the quarter," the brokerage said.
On the operating front, Kotak expects a 200 bps QoQ and 175 bps YoY contraction in gross margin as price hikes would not fully offset the stubborn inflation in the crude basket.
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The brokerage expects the EBITDA margin to expand 115 bps YoY on a low base (base quarter margins were depressed due to operating deleverage on account of the second Covid wave) but it sequentially, it may slip 75 bps QoQ.
The EBITDA growth maybe 62 percent YoY and 2.7 percent QoQ, it said.
Motilal Oswal also expects gross margin to decline YoY and QoQ due to the high inflationary environment. Tio2 prices, the raw material for the paint industry, grew by 54.9 percent YoY but was flat QoQ in Q1FY23.
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The brokerage sees EBITDA growth at 54 percent YoY and 160 bps margin expansion for the quarter.
Key things to watch out for would be the company's commentary on the raw material cost inflation and demand outlook after the price hikes.
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