Asian Paints Q4 Insight: Raw Material Costs to Keep Earnings Growth Tepid; demand outlook after price increases

NEW DELHI: Asian Paints is expected to post single-digit profit growth for the March quarter, even as analysts forecast sales growth of more than 10-21%. Margins are expected to decline by 200 to 400 basis points due to a jump in raw material costs. Volume growth is estimated at 6-7%.

Analysts said investors may be wary of comments on the outlook for demand after recent price increases.

Emkay Global expects Asian Paints to post a 1.3% year-on-year (YoY) decline in net profit to Rs 841 crore from Rs 852.10 crore in the corresponding quarter of last year . Sales are expected to rise by 21.1% year-on-year to Rs 8,053.80 crore from Rs 6,651.40 crore in the same quarter last year.

Ebitda margin is expected to fall 379 basis points to 16% from 19.8% year-on-year.

“We estimate 7% volume growth in the domestic business on a relatively strong basis (48% growth in Q4FY21). Higher input cost inflation, driven by crude prices, should lead to a contraction in GM of 555 bps. 379 bps YoY should be partially constrained by positive operating leverage,” Emkay said.

Kotak Institutional Equities saw its profit rise 6.7% to Rs 909.30 crore on a 17.3% year-on-year increase in net sales to Rs 7,799.60 crore.

“We expect 6% volume growth and 19% value growth for Domestic Decorative Paints, helped by continued market share gains, a focus on economy end products and price increases. some deceleration in 3-year CAGR growth trends due to inflationary pressures and commensurate price increases.We expect 11.5% year-over-year growth in affiliate revenue,” he said.

Kotak factors in a 230 basis point decline in Ebitda margin, driven by lower gross margin and higher other expenses.