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Asian Paints, one of the largest paint companies in Asia, reported a 53.3% YoY increase in net profit for Q3 2023, yet the performance fell short of market expectations leading to a share sell-off. The company’s revenue saw minimal growth of 0.2% YoY, according to the company’s latest financial report.
Despite the lackluster performance, HSBC maintains a buy view on Asian Paints’ stock, forecasting a strong H2 FY2024 performance and citing an attractive valuation. The bank has set a price target of INR 4,000 for the stock.
Contrarily, Motilal Oswal holds a neutral stance due to several challenges facing the company. These include competition from well-funded competitors, unpredictable rainfall patterns that could affect demand, and rising input costs. As a result of these factors, Motilal Oswal has revised its EPS forecast downwards.
For Q2 FY24, Asian Paints posted a consolidated net profit of INR 1,232.39 crore ($165 million), marking a significant YoY increase of 53.31%. However, it represented a sequential decline of 21.74%, which the company attributes to market sentiment impacted by late Diwali celebrations.
The company’s consolidated revenue for Q2 FY24 was marginally up by 0.03% YoY at INR 8,478.57 crore ($1.13 billion), but down 7.66% from the June quarter. The domestic coatings business experienced subdued revenue growth of 1.1%, while international business faced economic and forex challenges in South Asia and Egypt despite robust growth in the Middle East.
EBITDA for the quarter was INR 1,717 crore ($230 million) with a margin of 20.2%. Sales from the international business fell by 3.9%, and Home Décor experienced a decline in Bath Fittings and Kitchen sales. However, the Industrial sector, including acquisitions White Teak and Weather Seal, registered growth. APPPG sales in the Industrial sector increased by 11.4%.
The Automotive & Refinish business showed decent growth, and the General Industrial Coatings business maintained its double-digit growth trajectory. Looking ahead, Asian Paints remains optimistic about improved demand conditions supported by a longer festive season and buoyant domestic economic growth, coupled with moderating raw material prices.
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