Asian Paints Q3 Preview: Anticipating Mixed Performance Amidst Varied Volume Growth Predictions/Mint
Asian Paints Q3 Preview: Anticipating Mixed Performance Amidst Varied Volume Growth Predictions
Asian Paints is expected to unveil a mixed bag performance in its Q3 results ending December, with analysts noting satisfactory paint demand during November’s festival month, albeit losing momentum thereafter. The erratic monsoon pattern posed challenges to substantial demand pickup during the quarter. Despite this, industrial and project demand is likely to provide support to paint manufacturers like Asian Paints.
Volume growth expectations remain subdued, with forecasts ranging from mid-single digits to high single digits or low double digits. ICICI Securities anticipates mid-single-digit volume growth, attributing better offtake around Diwali but a subsequent loss of momentum. A 1% price cut implemented by Asian Paints in November 2023 did not significantly uplift customer sentiment, according to dealer checks by the brokerage.
ICICI Securities notes the strength of B2B revenue growth (project business) in Q3FY24, while dealers anticipate improved demand in Q4FY24, especially in Feb-Mar’24.
Kotak Institutional Equities estimates a 6% YoY growth in standalone revenues for Asian Paints in Q3, with volume growth, particularly in commodity products and the economy range, expected to be slightly higher at around 9%. HDFC Securities also predicts a revenue growth of 6.4% YoY for Asian Paints in the December quarter, factoring in a 10% volume growth and a 3.5% YoY price decline.
Margins are anticipated to remain supportive for earnings, with HDFC Securities projecting a 457 basis points YoY expansion in gross margins. Gross margin recovery is expected to drive Ebitda margin up by 269 bps YoY and 111 bps sequentially to 21.4%. The net profit may rise 27.1% YoY and 16.4% sequentially for Asian Paints.
Key areas to watch in the results include commentary by Asian Paints management on demand trends, input cost trends, rebating and discounting trends, and the trajectory of dealer additions. Kotak Institutional Equities expects a 30.7% rise in net profits with Ebitda margins at 21.8%.