Related
NEW DELHI: is likely to see strong sales growth but rising raw material costs will make a sharp dent in its bottom line and operating margins, analysts said.
The consensus shows revenue may rise in the range of 16-24 per cent during the December quarter, profits may fall around 21-22 per cent, while margins are likely to decline to the tune of 9 percentage points.
“We expect strong double-digit growth in domestic decorative paints, aided by market share gains from unorganised/organised players, price increases, and strong growth momentum in waterproofing and wood finish. We expect volume growth of 15-16 per cent in Q3,” said analysts at Sharekhan.
They added that higher raw material prices (mainly crude oil and titanium dioxide) would result in a 758 bps YoY decline in gross margins and a 910 bps decline in operating margins. However, margins are likely to recover sequentially due to price hikes undertaken by the company.
Sharekhan said net profits are expected to decrease by 22 per cent during the quarter.
Even at the end of September quarter Asian Paints reported a 28 per cent year-on-year decline in consolidated net profit. The paint manufacturer’s consolidated revenues in the quarter had grown by 32.6 per cent.
“Revenues to witness growth of 24 per cent YoY largely driven by combination of high teens volume growth and value growth in deco paints; price hikes; and strong momentum in waterproofing products,” said Axis Securities.
It added that there will be gross Margin contraction owing to YoY inflation in raw material prices, which will be partially offset by price hikes. EBITDA margins will also contract owing to decline in gross margins.
JM Financials also expects volume growth to remain in double-digit. It also projects and gross margins to recover in Q3 post cumulative 22 per cent price hike. “Commentaries on exit-growth rate will be critical post the steep price-hike in Nov-Dec,” it said.
Analysts say key things to watch out will be:
-Demand outlook - Metros/Tier 2/3 towns
-Raw material outlook
-Pricing actions
The consensus shows revenue may rise in the range of 16-24 per cent during the December quarter, profits may fall around 21-22 per cent, while margins are likely to decline to the tune of 9 percentage points.
“We expect strong double-digit growth in domestic decorative paints, aided by market share gains from unorganised/organised players, price increases, and strong growth momentum in waterproofing and wood finish. We expect volume growth of 15-16 per cent in Q3,” said analysts at Sharekhan.
They added that higher raw material prices (mainly crude oil and titanium dioxide) would result in a 758 bps YoY decline in gross margins and a 910 bps decline in operating margins. However, margins are likely to recover sequentially due to price hikes undertaken by the company.
Sharekhan said net profits are expected to decrease by 22 per cent during the quarter.
Even at the end of September quarter Asian Paints reported a 28 per cent year-on-year decline in consolidated net profit. The paint manufacturer’s consolidated revenues in the quarter had grown by 32.6 per cent.
“Revenues to witness growth of 24 per cent YoY largely driven by combination of high teens volume growth and value growth in deco paints; price hikes; and strong momentum in waterproofing products,” said Axis Securities.
It added that there will be gross Margin contraction owing to YoY inflation in raw material prices, which will be partially offset by price hikes. EBITDA margins will also contract owing to decline in gross margins.
JM Financials also expects volume growth to remain in double-digit. It also projects and gross margins to recover in Q3 post cumulative 22 per cent price hike. “Commentaries on exit-growth rate will be critical post the steep price-hike in Nov-Dec,” it said.
Analysts say key things to watch out will be:
-Demand outlook - Metros/Tier 2/3 towns
-Raw material outlook
-Pricing actions
Pick the best companies to invest
BECOME AN ETPRIME MEMBERRead More News on
(What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)
...moreDownload The Economic Times News App to get Daily Market Updates & Live Business News.
Pick the best stocks for yourself
Powered by