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.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.