- 21 Oct 2022
- ICICIdirect Research
ASIAN PAINTS REPORTS MUTED Q2 PERFORMANCE
ASIANPAINT - 2769 Change: -73.40 (-2.58 %)News:
Asian paints' consolidated revenue grew by 19.2% YoY to Rs 8457.6 crore supported by 10% YoY volume growth in Q2FY23. Due to changes in product mix and a delay in price hikes, gross margin grew marginally by 98 bps YoY (down 197 bps QoQ). EBITDA margin increased by 177 bps YoY (down 365 bps QoQ) to 14.5%, driven by improved operating leverage. PAT increased by 32.8% YoY to 803.8 crore on a lower base. The company announced Capex of Rs2,100 crore over the next 3 to 4 years for setting up an installed capacity of 1.5 lakh tonnes p.a. for VAE and 1 lakh tonnes p.a. for VAM, its key raw material.
View:
We believe that Asian Paints posted a weak Q2 performance. Although the company took price hikes to offset the pressure on margin, gross margin declined by 197 bps sequentially due to inflation in raw material prices. The EBITDA margin at 14.5% is lower than Asian Paints' pre-covid margin level of 18-20%. As a result, PAT declined 22% on QoQ basis due to sharp fall in EBITDA.
Impact:
Negative.