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    Asian Paints Q2 earnings better than expected

    Synopsis

    Semi-urban and rural India is probably coming almost back to normal and that would have resulted in higher volume growth, says Sanjay Manyal.

    Asian Paints Q2 earnings beat Street estimates, net profit flat at Rs 830 crore
    Asian Paints Q3 and Q4 numbers could be even better because of a huge pent up demand, says Sanjay Manyal, AVP -- equity research analyst, ICICI Securities.

    On Asian Paints result
    Consolidated revenue from operations increased 5.93 per cent year on year to Rs 5,350.23 crore.That is more or less what we were expecting. We were expecting 6% growth and that number is pretty closer to that. The volume growth was approximately 7%. We believe that probably because of the shutdown or the lockdown in Q1, there would have been a lot of pent-up demand which would have incurred during this quarter.

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    This demand is largely coming from the tier II, tier III cities, semi-urban and the rural regions because metros and urban areas are still witnessing very slack demand. But semi-urban and rural India is probably coming almost back to normal and that would have resulted in higher volume growth. Obviously at the same time, across the industry, there have been a lot of cost cutting measures and the raw material price have been benign and that has resulted in EBITDA margin expansion and earning growth. So, numbers are better than what we were expecting on the earnings front.

    On revising price targets
    We will review our numbers specifically after the concall. Currently the only concern for the stock is the premium multiples it is commanding. We probably have to review those numbers after the concall with the management. But we understand that Q3 and Q4 numbers could be even better because what we see is a huge pent up demand that has been there even in the initial phase of October and probably not only the tier-2 cities, but other cities also were driving the growth for Q2, specifically before the festive season kicks in.

    We understand the next two quarters could also be witnessing a huge pent up demand in the decorative side of the business.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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