Asian Paints dips 7% post Q2 results; stock hits over 2-month low

Shares of Asian Paint dipped 7 per cent, hitting an over two-month low of Rs 2,961 on the BSE in Thursday’s intra-day trade, after the company reported 28.2 per cent year on year (YoY) decline in consolidated net profit at Rs 595.96 crore in July-September quarter (Q2FY22), due to higher raw material cost. The company had posted a profit of Rs 830.37 crore in the year-ago quarter.

The stock of India's leading paint company was trading at its lowest level since August 12, 2021. In the past three months, it has underperformed the market by falling 5 per cent, as compared to a 16 per cent surge in the S&P BSE Sensex.

"Profit before depreciation, interest, tax and other income (PBDIT) margin declined to 12.73 per cent from 23.64 per cent in Q2FY21. Steep inflation seen in raw material prices, since the beginning of this calendar year, has been phenomenal and has impacted gross margins across all businesses in the quarter," Asian Paint said.

On the margin front, ICICI Securities has expected EBITDA margin to decline 345 bps YoY to 21 per cent due to higher raw material costs and advertisement expenses. Profit after tax was expected to increase 4 per cent YoY at Rs 886 crore, mainly due to strong sales growth, the brokerage firm had said in an earnings preview report.

"However, revenue from operations has increased by 32.6 per cent to Rs 7,096 crore from Rs 5,350 crore, due higher volume growth by domestic decorative business. The domestic Decorative business continued to move ahead on its high growth trajectory with an unprecedented 34 per cent volume growth in the quarter and a strong compounded growth rates over the last 2 years. The industrial coatings business also registered strong double digit revenue growth led by robust demand for protective coatings and uptick in the automotive sector," the company said.

The management said the company have taken a series of price increases and would look at further price increase to mitigate the impact of this persistently high inflation and are confident that the company should be able to turn this around strongly in the coming quarter. "All the businesses continue to engage in some ground-breaking work to enhance customer engagement and advance the value proposition of its various product and service offerings, further enlarging the organization’s value creation potential," it added.