Asian Paints Q4 results: Volume, Ebitda growth beat Street estimates. Here's what analysts say on stock

Asian Paints' 45 per cent year-on-year (YoY) jump in the consolidated net profit, a double-digit volume and value growth in decorative business and expansion in margin in the March quarter impressed analysts covering the paints makers.

Preeyam Tolia, Senior Research Analyst at Axis Securities found Asian Paints results to be strong, led by double-digit volume growth. Ebitda margins, the analyst said, saw significant beat, primarily led by better-than-expected gross margin expansion due to lower raw material prices.

The analyst sees further margin recovery going ahead due to lower raw material prices and cost-efficiency measures.

"However, competition in the paint sector will be key to watch out for, as earnings will likely remain volatile. In the long term, we remain positive on Asian Paints as the recent announcement of setting up a Vinyl Acetate Ethylene Emulsion (VAE) & Vinyl Acetate Monomer (VAM) plant, a white cement facility through Joint Venture in Fujairah, UAE, expanding manufacturing footprint, and launching differentiated next-gen nanotechnology based emulsions and waterproofing products, are steps in the right direction," Tolia said.

Asian Paints reported a profit at Rs 1,234.14 crore compared with Rs Rs 850.42 crore in the same quarter last year. The paint manufacturer said its consolidated revenue from sales rose about 11 per cent YoY to Rs 8,750.85 crore from Rs 7,889.94 crore in the year-ago period.

In his first cut on Asian Paints earnings, Amnish Aggarwal, Head of Research at Prabhudas Lilladher said Asian Paints reported strong numbers against his estimates on all fronts. Volumes growth of 16 per cent was ahead of PL estimate of 13 per cent.

"Deflation in commodity basket has come through very favourably during the quarter with GM/EBITDAM expansion of 393 bps/256 bps QoQ. We believe the trend should continue in the near term at a modest pace. However, Asian Paints might settle for margins lower than historical given the expected entry of Grasim in Paints. We remain positive on Asian Paints; however, a re-rating looks unlikely given premium valuations and likely disruption due to the entry of a large player," he said.