Asian Paints gains 11% after strong March quarter performance

Ebitda surged 53.4% y-o-y to ₹1,318.3 crore and margin expanded by 130 bps y-o-y to 19.8% in Q4FY21, as the margin was impacted by the higher raw material prices but supported by cost measures.Premium
Ebitda surged 53.4% y-o-y to ₹1,318.3 crore and margin expanded by 130 bps y-o-y to 19.8% in Q4FY21, as the margin was impacted by the higher raw material prices but supported by cost measures.
 2 min read . Updated: 14 May 2021, 01:01 PM IST Ashwin Ramarathinam

MUMBAI : Shares of Asian Paints gained as much as 11% on Friday after the company reported a consolidated net profit rise of 81.13% to ₹869.89 crore for the quarter ended 31 March 2021 against ₹480.25 crore for the same quarter last year.

At 12.58 pm, Asian Paints was trading at ₹2,788.00 up 9.07% from its previous close, while the benchmark index, Sensex lost 0.08% to 48,650.76.

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Revenue from operations in March quarter was at ₹6,651.4 crore, up 43.5% from ₹4,635.59 crore for the corresponding year-ago quarter, with the volume growth at 48%.

Ebitda (earnings before interest, tax, depreciation, and amortization) surged 53.4% y-o-y to ₹1,318.3 crore and margin expanded by 130 bps y-o-y to 19.8% in Q4FY21, as the margin was impacted by the higher raw material prices but supported by cost measures.

Analysts at Motilal Oswal in a note to clients said, "Asian Paints posted a much faster recovery than most peers, ending FY21 with 7% topline growth, post a decline of 43% in Q1, as a bounceback in demand after the impact of the second covid wave recedes. Changes in business model have resulted in a 7.4% / 4.8% cut in FY22E / FY23E EPS on account of elevated crude oil-linked material cost pressures, valuing the stock at 58.6 times FY23 estimated earnings per share." The brokerage has a neutral rating on the stock.

In FY21, the leading paint company registered a 15.6% growth in profit at ₹3,206.75 crore and 7.4% growth in revenue at ₹21,712.79 crore compared with the previous year.

Asian Paints said the board of directors recommended a final dividend of ₹14.50 per equity share, taking the total dividend to ₹17.85 per equity share for FY21.

Analysts at Emkay Global Financial Services said strong recovery led by domestic decorative business; aggression on new products and channels may help sustain share gains

"Despite weak Q1, the domestic decorative business recorded volume / value growth of 13% / 8% in FY21. Management indicated strong growth in tier-II-IV towns and bounce back in tier-1 and metros, leading to better mix from premium emulsions, increased aggression in projects space in Q3 and Q4 also led to higher growth in paints and construction chemicals," the brokerage said.

"Aggression on volume growth is likely to drive further market share gains ahead. Lockdown impact and margin pressures are likely to restrict near-term upsides," it added. The brokerage has hold rating on the stock.

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