Asian Paints Q2 earnings beat estimates, profit rises 1.2% with double-digit volume growth

Asian Paints Q2 earnings beat estimates, profit rises 1.2% with double-digit volume growth in decorative business

Asian Paints has reported better performance than expected in the quarter ended September 2020, with double-digit volume growth in decorative business against 7-8 percent growth expectations by the CNBC-TV18 poll estimates.

Consolidated net profit grew by 1.2 percent year-on-year to Rs 851.9 crore, hit by higher tax cost, and revenue increased 5.9 percent YoY to Rs 5,350.2 crore in July-September period 2020.

“Profitability across businesses was well supported by a better product mix, the stable raw material prices, favourable foreign exchange rate and the large number of cost optimisation measures put in place by the Management,” Amit Syngle, Managing Director and CEO, said.

He further said all the business segments continued to witness improving demand conditions on a progressive basis during the second quarter of this financial year.

“The decorative business segment registered good volume growths for each of the months and therefore a healthy double-digit volume growth for the quarter with demand picking up across regions. The other business segments in India including the two industrial coatings business and both the segments in the Home Improvement category also experienced improving trends in line with the phased-out re-opening of the economy,” he detailed.

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Syngle said the international business portfolio did well, supported by favourable market conditions in the Middle East, Africa and Asia, with the exception of Nepal, which continued to witness challenging business conditions due to the pandemic.

Consolidated profit was estimated at Rs 700 crore on a revenue of Rs 5,200 crore for the quarter, according to the average of estimates of analysts polled by CNBC-TV18.

Tax expenses for the quarter stood at Rs 293.6 crore, against Rs 7.2 crore in the year-ago period, the company said in its BSE filing.

At the operating level, consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 32.5 percent to Rs 1,265 crore and margin climbed 470 bps to 23.6 percent compared to the corresponding period last fiscal, which were higher than the CNBC-TV18 poll estimates of Rs 1,100 crore and 21.2 percent respectively.

“The company reported strong numbers in times of COVID by beating street expectation in all counts. We are bullish on Asian Paints on the back of improving demand scenario and given its strong distribution and supply chain,” Keshav Lahoti, Associate Equity Analyst at Angel Broking said.

Paints segment registered a 6.2 percent YoY growth in Q2FY21 revenue at Rs 5,233 crore with its earnings before interest and tax (EBIT) rising 29 percent and margin expansion of 400 bps YoY.

The stock closed with a loss of 0.67 percent at Rs 2,100.25 on the BSE.