Asian Paints Q3 preview: Expect moderation in sales growth; volume growth to be muted

Asian Paints is likely to report moderation in sales growth and a likely decline in volumes in the December quarter, analysts said. According to a poll by ET Now, the revenue is estimated at Rs 9,480 crore, an increase of 11% year-on-year (YoY), while net profit is seen at Rs 1,156 crore.

The company posted a revenue of Rs 8,527 crore and a profit after tax of Rs 1,016 in the corresponding period of the previous year.

Some key monitorables in the earnings include demand outlook in metros, Tier 2 and 3 towns, raw materials outlook, pricing actions, and increased competitive intensity.

Asian Paints's scrip closed 0.31% higher at Rs 2,950 on Wednesday. So far, the stock is down about 3.19% this year, against a 0.18% decline in the Nifty50 index.

Here's what analysts expect from Asian Paints' Q3 earnings

Axis Securities
Axis Securities expects sales growth to moderate to mid-single-digit growth of 4.6% at Rs 8,923 crore on weak demand (consumer inflation and easing pent-up demand). The volume growth is likely to be negative during the quarter under review. The brokerage expects EBITDA margins to decline 100 basis points YoY, mainly due to lower operating leverage. Analysts at Axis Securities expect PAT to decline 2.6% to Rs 989 crore during the quarter under review.

ICICI Direct
Asian Paints is likely to report muted revenue growth of 5% YoY to Rs 8,989 crore in Q3, owing to lower volume offtake. The brokerage believes volume growth is also be lower at 3% YoY in Q3FY23, due to a higher base and lower rural demand. On the margin front, benefits of lower raw material prices are likely to be offset by an inferior product mix resulting in a flattish gross margin YoY. Meanwhile, the EBITDA margin is likely to decline 90 basis points YoY to 17% due to higher advertisement expenses and low operating leverage. The company is likely to report a flattish PAT of Rs 1,042 crore, tracking a lower EBITDA margin.

Motilal Oswal
The brokerage expects the adjusted PAT to be in the range of Rs 1,218 crore, and the operating profit is seen at Rs 1,808 crore. It expects volume growth of 5% YoY. Gross margins are likely to expand due to lower input costs both on a sequential and year-on-year basis. Investors could watch out for commentary on the demand outlook in rural areas and mix impact, if any.

Kotak Institutional Equities
Kotak Equities also echoed similar sentiments that standalone volumes could decline, mainly due to a high base. It estimates a 7-8% YoY decline in volumes (ex-putty) and moderation in 3-year volume (exputty) CAGR to about 8% in the third quarter. Gross margins are likely to expand 115 basis points YoY, driven by the fall in crude/paint input prices, partly offset by deterioration in product mix. The EBITDA margin is seen contracting 135 basis points due to lower operating leverage.