Shares of Asian Paints were trading 3 per cent lower in early trade on Wednesday a day after the company reported a marginal decline in its consolidated net profit at Rs 850 crore for the fourth quarter ended March 2022.
Asian Paints had reported a net profit of Rs 852 crore in the year-ago period.
However, the revenue from operations rose 18.6 per cent to Rs 7,893 crore from Rs 6,651 crore in the same quarter last fiscal, it said in a regulatory filing.
The stock opened a tad higher at Rs 3,085.05 against the previous close of Rs 3,083.70. However, it erased all early gains and tanked over 3 per cent to Rs 2,980.
IDBI Capital said that Asian Paints (APL) reported in-line results. The volume growth trend in decorative is encouraging at 8%YoY on a high base of 48%. This performance is despite soft business in Jan’22 due to Omicron.
"APL took 2% price hike in AprMay’22 and expects 5% more price hike in 1QFY23. As per revised outlook; we have marginally trimmed our EPS estimate by 3-4% in FY23-24E. We have cut our multiple to 65x. Our target price stands at Rs 3,453 with HOLD rating," it added.
Dolat Capital noted that APL’s Q4FY22 revenues came in line but EBITDA and APAT were a beat. It highlighted that steep raw material inflation and delayed price pass on resulted in 450bps contraction in gross margins.
"However, the margins improved sequentially by 200bps as the company implemented substantial price hikes post-festive season. We believe that the margins would improve with price pass on and stabilization of RM prices," it said.
"We have marginally tweaked our EPS estimates for FY23/24E to Rs 46.9/59.7 factor in better margins compared to most other consumer companies. Valuing the stock at 58x FY24E EPS, we have arrived at a target price of Rs 3,462 and maintain our rating Accumulate," the brokerage house added.
According to Motilal Oswal, the volume growth was affected in Jan’22 due to the Omicron COVID wave. It clocked double-digit volume growth in Feb-Mar’22. Though growth in the International business was good in 4QFY22, profitability was affected by its inability to fully pass on the increase in cost and the currency devaluation in Sri Lanka, Egypt and Ethiopia, which is likely to continue.
"While the demand outlook is better than FMCG peers, despite high price increases, valuations of 54.4x FY24 are expensive. We maintain our Neutral rating with a target price of Rs 3,120 per share," it added.
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