Asian Paints Q3 preview: Bottomline, margins to surge as volume growth seen strong

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Asian Paints Q3 preview: Bottomline, margins to surge as volume growth seen strong


MUMBAI: India’s largest industrial and decorative paints manufacturer Asian Paints is expected to report a strong set of earnings for the December quarter with consolidated net profit set to surge 23 per cent on year and topline to rise nearly 11 per cent.

Asian Paints is expected to report a consolidated net profit of around Rs. 940 crore on consolidated net sales of nearly Rs 6,000 crore, according to estimates by 13 brokerages polled.

In the year-ago quarter, the paints manufacturer had reported a consolidated net profit of Rs 764.4 crore and revenues of Rs 5,420.2 crore.

The shares of the company have risen 39 per cent in the three-month period ended December, reflecting the optimism among investors for the Q3 earnings performance. Asian Paints will report its earnings on Thursday.

In the reporting quarter, analysts are betting on the company to register a scintillating growth in volumes of its decorative segments. Asian Paints’ decorative segment volume is likely to surge 13-22 per cent in the quarter led by strong demand in rural and tier-II and tier-III cities.

“We expect strong growth in decorative paints volumes in the December 2020 quarter aided by the late festive season this year (augurs well for paints demand) and buoyant demand in tier-2 and tier-3 towns,” said brokerage firm Kotak Institutional Equities in its preview report.

While the volume recovery story is expected to continue for Asian Paints, the company’s gross margins in the quarter may remain flat on year at best because of the increase in price of crude oil derivatives. Brent futures crude oil price rose over 30 per cent in the December quarter.

However, the rise in prices of crude oil is likely to be more than offset by the impressive operating leverage and cost control measures the company has undertaken. Analysts expect the company’s consolidated operating margin to rise around 60-199 basis points on year to 22.5-2.39 per cent in the three-month period ended December 31.





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