Asian Paints, one of the largest paint companies in India, is expected to report over a 200 percent year-on-year increase in consolidated profit, with around 100 percent growth in volume in the quarter ended June 2021, largely driven by a low base. The Q1FY21 earnings were hit by nationwide Covid lockdown.
Since the start of financial year FY22, the stock has gained 17.5 percent and rallied 73 percent in the last one year. The revenue growth is likely to be 90 percent higher compared to the year-ago quarter. It was down 43 percent YoY in Q1FY21.
"We expect 100 percent and 96 percent YoY growth in volumes and value in domestic decorative paints notwithstanding lockdown/restrictions pertaining to the second wave of pandemic," said Kotak Institutional Equities, which expects a 94 percent YoY growth in consolidated revenue and 228 percent growth in profit for June quarter 2021.
Market share gains from unorganised players, share gains in institutional project sales and strong growth momentum in waterproofing would drive strong performance, it said.
Emkay Research also expects a 233 percent year-on-year growth in consolidated profit and a 93 percent rise in revenue for the quarter. "Despite lockdowns, a very low base of Q1FY21 (44 percent decline) should lead to volume and value growth of 95 percent and 93 percent in the domestic business," said the brokerage.
At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) may grow more than 125 percent and the margin could expand 280 bps YoY led by operating leverage but there could be some contraction in gross margin on higher inflation.
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"We expect 225 bps YoY (70 bps QoQ) contraction in gross margin led by raw material inflation and partly offset by value engineering and about 2 percent price increase taken starting May 2021," said Kotak.
The brokerage further said EBITDA margin will be up 280 bps YoY off a weak base aided by operating leverage and partly offset by higher advertising and promotion spends versus base quarter.
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