Asian Paints Q3 Result Review - Overall Improvement Expected Here On: Dolat Capital

Dolat Capital Report

Asian Paints Ltd.’s Q3 FY23 revenues were below our estimates. The company reported flattish volume growth in the decorative segment on an unfavorable base of 18%. The performance was partially impacted by extended monsoon.

Nevertheless, gross margin improved 180 basis points on price hikes and favorable cost environment – resulted in 60 bps improvement in Ebitda margin. Hence Ebitda and adjusted profit after tax came in line with estimate.

On three-year basis, Asian Paints reported 16/17% volume/ compound annual growth rate.

We believe that the company would continue to report double digit volume growth in the long run benefiting from industry growth and its leadership, planned capacity addition over four to five years and ongoing acquisitions.

We have downward our earnings per share estimates for FY24/25E by 4/1% to Rs 55.5/66.3 respectively to factor in Q3 performance. Considering recent price hikes and commodity deflation we expect margins to improve here on.

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