Asian Paints share price declined 2 percent in early trade on Friday after the company came out with its December quarter results.
Asian Paints on January 20 reported a consolidated profit after tax (PAT) of Rs 1,016 crore for the quarter ended December 2021, down 18 percent from Rs 1,238 crore in the year-ago quarter. It was, however, a 70 percent growth from Rs 596 crore in the previous quarter.
The company reported a 26 percent rise in consolidated revenue at Rs 8,527 crore from Rs 6,788 crore a year back. Revenue in the September quarter was Rs 7,096 crore.
Consolidated revenue from the paints business grew 25 percent on-year to Rs 8,319 crore compared to Rs 6,635 crore in the same quarter a year ago. On a sequential basis, the revenue of paints business grew 21 percent from Rs 6,902 crore.
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Here is what brokerages have to say about the stock and the company after its December quarter earnings:
Nomura
Foreign research house Nomura has maintained a 'buy' call and raised target to Rs 3,875 from Rs 3,550 as it expect strong demand to continue and margin to get better.
The third quarter was a beat on volume/value, while margin misses. The company delivered Q3 volume/value growth of +18 percent/+26 percent, YoY.
The management does not expect any meaningful impact on volume growth. The growth is driven by higher demand in metros, Tier-1 and 2 markets and strong sales growth is likely to continue, aided by share gains in new/niche categories.
Nomura expects margin pressure to abate on the back of price increases. It lowered the FY22 EPS by 3 percent to factor in Q3 margin miss.
The broking firm raises the FY23 and FY24 EPS by 4 percent each to factor in strong volume/value growth and margin improvement.
Credit Suisse
The research firm has kept 'outperform' call on the stock and raised the target price to Rs 3,700 from Rs 3,500.
It increased the FY22-24 earnings by 3 percent and expects a greater margin recovery in Q4.
Jefferies
The broking firm kept the 'underperform' rating on the stock with a target at Rs 2,700 on the back of an impressive Q3 with 18 percent volume growth in India decorative business.
The base has no consequence here as 2-year and 3-year CAGR is even higher. There has been strong growth momentum despite highest-ever product price hike, it added.
The structural story on paints is strong & company best in class.
Prabhudas Lilladher
We increase our FY22/FY23/FY24 EPS by 13.6 percent/7 percent/3.2 percent, given (1) strong pent-up demand, (2) long runway for growth in Rurban India, (3) bounce back in metro/Tier1/2 demand, and (4) strong traction in project business.
"We expect the company to sustain premium valuations given strong growth visibility. We maintain buy with a target price of Rs 3,762 (Rs 3,675 earlier). Any structural margin correction post Grasim’s entry in Decorative paints is a risk to our call.
Motilal Oswal
The miss on earnings has led to a 9.8 percent cut in FY22 EPS, but there have been no material changes in our FY23 and FY24 EPS estimates.
While sales growth was impressive in 3QFY22, even on a reasonably high base of the previous year, it remains to be seen how the company will fare on the demand front in subsequent quarters – especially as (a) festive demand drivers would no longer be at play and (b) the sales growth base is even more challenging going forward.
The valuations are expensive at 66x/57x FY23E/FY24E EPS. We maintain our neutral rating, with target price of Rs 3,500 on 60x Mar’24E EPS, which leaves little room for an upside.
At 9:32am, Asian Paints was quoting at Rs 3,309.85, up Rs 2.15, or 0.07 percent, on the BSE.
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