Asian Paints on May 10 reported half a percent year-on-year growth in consolidated profit at Rs 874 crore for the quarter ended March 2022, as higher input costs pressured operating profit margin
Asian Paints Q4 earnings miss estimates
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Asian Paints share price was trading lower by three percent in morning, a day after the company missed estimates as profit flatlined.
Asian Paints on May 10 reported half a percent year-on-year growth in consolidated profit at Rs 874 crore for the quarter ended March 2022, as higher input costs pressured operating profit margin. Exceptional loss of Rs 115 crore also hit profit growth. The CNBC-TV18 poll estimate for the bottomline was Rs 913 crore.
Revenue from operations grew 18.7 percent to Rs 7,893 crore with domestic decorative business registering eight percent volume growth.
“It was yet another quarter of solid and strong double digit value growth across all businesses despite uncertainty around COVID, macroeconomic challenges and heightened geo-political tensions,” Amit Syngle, managing director and chief executive, said.
He further said the International business managed to deliver a double-digit revenue growth for the quarter despite severe challenges in key markets.
At the operating level, EBITDA increased 9.5 percent to Rs 1,443 crore. Margin was down 150 basis points to 18.3 percent but improved sequentially by 22 bps.
At 10:26 am, the stock was trading at Rs 2,986.10, down Rs 97.60 or 3.17 percent on NSE. It has touched an intraday high of Rs 3,106.75 and an intraday low of Rs 2,980.30.
Domestic research and broking firm HDFC Securities has maintained a sell call on the stock with a target of Rs 2,550, a downside of 17 percent.
“Asian Paints’ performance remains the most impressive among top three players. We suspect future price hikes are likely to lag RM inflation, as demand elasticity may get tested. Hence, we marginally tone down our FY23/24 earnings per share (EPS) estimates by 3.6/2 percent to account for lower GM (gross margin) and maintain our sell rating on the stock with a DCF-based target of Rs 2,550 per share, implying 53x FY24 price to earnings (P/E),” said Varun Lohchab, head – institutional research, HDFC Securities.
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On the other hand, brokerage firm Sharekhan has a buy call on the stock with a target of Rs 3,689, an upside of 23 percent: “Asian Paints’ results were largely in line with expectations with an eight percent rise in volumes of the decorative paints business and consolidated OPM (operating profit margin) of 18.3 percent. Revenue and profit after tax (PAT) grew 18 and 10 percent year on year respectively.”
“Though volatile raw material prices will keep margins stressed in the near term, the management is confident of achieving OPM of 18-20 percent once raw material inflation stabilises while planned initiatives and better mix will support profitability in the medium term. The stock trades at 72/55x its FY2023/34 EPS. We maintain a buy on the stock with an unchanged price target of Rs 3,689,” it said.
Global research firm Citi has a neutral call on the stock and has cut the target to Rs 3,470 from Rs 3,515. It is of the view that Asian Paints reported decent results while input cost volatility continues. Demand trends remain reasonably steady despite macro challenges. EBITDA was up nine percent year on year, ahead of expectations given better cost control upside, the research firm said.
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