Despite solid Q2 revenue growth Asian Paints fails to make profit

Strong top line is driven by higher sales volume as well as higher value but profitability is significantly impacted due to an increase in input prices.

Margin Pressure

Revenue from operations stood at Rs 6,151 crore with a YoY increase of 36% and a QoQ increase of 28.5%. EBIT stood at Rs 845 crore with a YoY decrease of 22% and a QoQ increase of 4.4%. EBIT margin has affected very badly in Q2 which stood at 13.5%, a decline of 1000bps on a YoY basis.

This happened due to a 6% material inflation, and a 4% additional price inflation increase in Q2. Net profit stood at Rs 618 crore with a YoY decrease of 22% and a QoQ increase of 3.8%. Net profit margin also declined 700 bps on a YoY basis, standing at 17.4%.

Q2 Growth in business segments

“The domestic decorative business continued to move ahead on its high growth trajectory with an unprecedented 34% volume growth in the quarter and a strong compounded growth rate over the last two years. The industrial coatings business also registered a strong double-digit revenue growth led by robust demand for protective coatings and an uptick in the automotive sector," said Amit Syngle, Managing Director and CEO.

Growth drivers of Asian Paints

1. Supported by strong consumer sentiments coupled with festive season demand.

2. A good monsoon is a signal for rural demand.

3. An upturn in housing construction as well as industrial demand.

Asian Paints is India’s leading paint company and ranked among the top ten Decorative coatings companies in the world. Asian Paints along with its subsidiaries have operations in 15 countries across the world with 26 paint manufacturing facilities, servicing consumers in over 60 countries through Asian Paints, Apco Coatings, Asian Paints Berger, Asian Paints Causeway, SCIB Paints, Taubmans and Kadisco Asian Paints. Asian Paints is also present in the Home Improvement and Décor space in India.

At 3.30 pm, the stock was trading at Rs 3,005.00, up Rs 86.95, or 2.98% on NSE.