Asian Paints falls over 3% after Q2 net profit, revenue miss estimates on muted sales

The Asian Paints stock closed 3.6 percent lower on October 26 after the Mumbai-based company reported lower-than-expected earnings for the September quarter of the current financial year.

India’s biggest paint manufacturer’s net profit jumped 53 percent on-year (YoY) to Rs 1,232.39 crore but revenue rose marginally. Sequentially, both profit and revenue fell on account of muted sales.

Asian Paints closed at Rs 2,951 on the National Stock Exchange (NSE), down 3.6 percent from the previous close.

Asian Paints’ international business sales dropped due to challenges in South Asia and Egypt. Volumes saw mid-single digit growth YoY on a base of 10 percent volume growth, and margins expanded by around 570 basis points, aided by strong operational efforts and supported by easing inflation in raw material prices.

Also Read | Asian Paints Q2 results: Net profit rises 53% to Rs 1,232 crore, revenue flat; misses estimates

Although the festival been shifted to third quarter, the home décor market remained slightly sluggish, analysts said.

Analysts at Prabhudas Lilladher expect far better performance in the next quarter, given the festival boost and low base (nil volume growth).

“We expect back-ended returns given rich valuations pending Grasim’s entry in Q4,” they said, retaining “accumulate” rating on the stock with a target price of Rs 2,982.

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The stock has fallen nearly 3 percent in 2023, underperforming the Nifty 50. Rising crude price has put pressure on the stock, as various raw materials used in paints are petroleum-based.

The increase in input costs can could impact the manufacturing cost, which, in turn, can pressure margins of paint companies.

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