Asian Paints likely to report more than 15% growth in Q4 profit

Asian Paints, one of the largest paint companies in India, is expected to report healthy earnings growth in March quarter led by price increase, volume growth and cost rationalisation. The company will announce the numbers on May 9.

Profit is likely to grow more than 15 percent year-on-year driven by operating income, revenue growth and higher tax rate in the base quarter.

"Demand momentum continues post GST rate reduction. Recent price increases in Oct'18 and Dec'18 would enable margin expansion," said Prabhudas Lilladher that expects 18.5 percent YoY growth in profit for the quarter ended March 2019.

Motilal Oswal estimates 17.8 percent adjusted PAT growth for the quarter while ICICI Securities said margin expansion coupled with strong sales

growth would result in strong PAT growth of 27 percent YoY at Rs 629 crore.

Revenue growth could also be in double digits during the quarter led by strong volume growth.

"Asian Paints is likely to record sales growth of around 17 percent YoY in Q4FY19 led by volume growth (includes industrial paint) of around 13 percent YoY," ICICI Securities said.

Kotak, which expects 18.7 percent growth in revenue, said it modelled 20 percent YoY growth in domestic sales led by 16 percent volume growth and 4 percent price/mix-led growth.

At the operating level, price hike of products and lower oil prices may help the company report strong operating income and margin expansion. Crude prices fell 5.7 percent YoY and 6.7 percent QoQ in Q4FY19.

"Price hikes in paints have been around 7 percent YoY; however, considering unfavourable product mix (higher putty sales), the effective price hike will be around 3-4 percent YoY. Prices of TiO2 (raw material) and other monomers have declined from peak; this, coupled with price hike and stabilising INR, should aid sequential gross margin expansion," said Edelweiss that expects 17.5 percent EBITDA growth YoY.

Kotak expects 150 bps YoY expansion in EBITDA margin aided by easing raw material costs (broadly flat gross margin on YoY basis), tight cost control and operating leverage. EBITDA growth could be 28.2 percent YoY.

Key issues to watch out for would be volume growth trends and demand scenario in urban and rural geographies; market share trends; outlook for raw materials; and commentary on pricing action.

If you want to know more about our services, please visit Free Stock Tips