Asian Paints Q3 preview | Steady numbers likely; lower input prices to drive margin

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26 Aug, 2025 12:21

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Asian Paints releases its December quarter scorecard on January 22 and most brokerages are expecting the numbers to be steady amid a slowing economy and a slump in demand.

Other than the numbers, investors will closely watch the demand scenario in urban as well as rural areas.

Motilal Oswal Financial Services expects a 3 percent year-on-year (YoY) volume growth off a high base. The brokerage expects Asian Paints to report net sales of Rs 5,452.8 crore for Q3FY20 against Rs 5,294 crore for the corresponding quarter of the previous financial year.

Gross margin and EBITDA margin percentages are expected to be at 42.8 and 20.7, respectively.

Motilal Oswal expects adjusted PAT of Rs 698.9 crore, up 8 percent YoY.

Kotak Securities foresees some moderation in decorative paints volume growth, in line with the broad-based slowdown in consumption and partly due to a high base.

It expects a 23.4 percent YoY growth in adjusted PAT to the tune of Rs 784 crore.

"We expect 50 bps QoQ and 200 bps YoY improvement in gross margin, aided by favourable RM trends. We expect a 180 bps YoY increase in reported EBITDA margin," the brokerage said.

Kotak's estimates show that on like-for-like (LFL) basis, adjusted for Ind-AS 116, EBITDA margin would be up 60 bps YoY, led by an increase in gross margin, partly offset by higher selling, general and administrative expense (SG&A) and other expenses pertaining to new facilities (Vizag and Mysuru).

Kotak said it models a 25.2 percent effective tax rate (ETR) in India business (standalone) for Q3FY20. On LFL basis, net profit will increase 10 percent YoY (adjusted for ETR reset) and EBITDA would be up 10 percent YoY (adjusted for Ind-AS 116), Kotak said.

On the other hand, Edelweiss Securities anticipates revenue, EBITDA and PAT to grow about 7.8 percent, 8.3 percent and 16.5 percent YoY, respectively.

"For the quarter, we expect Asian paints to report nearly 10 percent YoY volume growth on a base of 22 percent (Q2FY20 saw 14 percent volume growth on a base of 11 percent)," said Edelweiss Securities.

Price cuts in paints have been about 0.6 percent YoY, but Edelweiss believes effective translation, taking into account lower realisation and discounts, would be negative 2 percent.

On the cost of goods sold (COGS) front, prices of crude-linked raw materials like TiO2 and other monomers have been benign, which should lead to gross margin expansion of 130 bps YoY, said Edelweiss.

"Higher staff cost and other expenditure compared to the base quarter will lead to EBITDA margin expansion of merely 10 bps YoY. Lower effective tax rate of 25.2 percent announced by the government as against 34.1 percent in Q3FY19 will lead to PAT growing ahead of EBITDA," said Edelweiss Securities.

Brokerage firm Emkay Global's estimates show Asian Paints volume growth maybe around 10 percent but weak mix and discounts are likely to result in lower sales growth.

However, lower input prices and favourable comparables will drive strong margin expansion, Emkay said.

"We expect a 9.1 percent YoY rise in net sales, 17.1 percent jump in EBITDA, 156 bps YoY growth in EBITDA margin percentage and a 34.3 percent YoY jump in PAT," said Emkay Global.