Asian Paints Results Preview | Profit may rise 9% and revenue likely to grow up to 18%

The brokerages expect the paints maker to report a consolidated PAT of Rs 910-930 crore for the quarter ended March 2022 as compared to Rs 852 crore recorded during the corresponding period last year. The expected profit is lower than the profit of Rs 1,016 crore achieved during the December quarter of the current financial year.

Revenue

Revenues for the quarter are expected to grow 10 to 18 percent on volume and value growth aided by price hikes effected by the company to partially offset the surge in raw material costs. On a sequential basis, revenues are expected to be decline 8-14 percent.

Experts expect the revenues for the quarter to be around Rs 7,330-7,830 crore as compared to Rs 6,651 crore registered during the same period a year ago. The company had reported revenues of Rs 8,527 crore during the previous quarter of current fiscal.

“We expect 6 percent YoY growth in volumes and 19 percent on year growth in value (17 percent volume and 16 percent value growth on three-year compound annual growth basis) in domestic decorative paints aided by continued market share gains, focus on economy-end products, and price hikes (22 percent on year),” a report from Kotak Institutional Equities said.

The brokerage expects strong growth outperformance versus peers (Berger, Kansai Nerolac and AKZO Nobel) to continue. “We expect some deceleration in three-year compound annual growth trends due to steep price hikes and Omicron and expect 11.5 percent YoY growth in subsidiary revenues,” Kotak added.

A report from Edelweiss Research expects revenue to grow 18.3 percent YoY: “In the base quarter Q4FY21, we saw sales growth of 74.9 percent, basis which in two years revenue has grown 69.8 percent.” It expects 2 percent YoY volume growth on a base of 48 percent YoY (Q3FY22 saw 18 percent volume growth on base of 33 percent YoY).

EBITDA and margins

With the rise in crude prices and its derivatives, which are the basic raw materials for the company, the overall input costs are expected to rise sharply. The price hikes are not expected to fully negate the rise in input costs.

Tio2 (Titanium Oxide, the main ingredient) prices rose sharply (up 63.4 percent YoY and 4.7 percent QoQ) in Q4FY22. “Expect gross margin to decline sharply YoY and QoQ due to a higher inflationary environment,” a report from Motilal Oswal said. The brokerage expects a steep decline of 680 basis points on year in gross margins at 36.4 percent for the quarter. On a sequential basis, it expects a decline of 40 bps in gross margins.

Kotak, on the other hand, “expects 315 bps QoQ (-330 bps YoY) improvement in gross margin as full benefit of price hikes (10 percent in November 2021 and 5 percent in December 2021) flows through in Q4FY22, though partly offset by higher promotional intensity”.

The EBITDA (earnings before interest, tax, depreciation and amortisation) margin is expected to decline by 200 bps YoY at 17.8-18 percent as compared to 19.8 percent in the same period a year ago. On a sequential basis, the EBITDA margin is likely to remain flat with a marginal decline of 30-50 bps.

Brokerage estimates

Motilal Oswal expects the company to report a PAT of Rs 930 crore on revenues of Rs 7,330 crore.

According to Kotak, the company is likely to report a PAT of Rs 910 crore while revenues are forecast at Rs 7,800 crore.

Edelweiss Research pegs PAT at Rs 931 crore and revenues at Rs 7,870 crore.

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