Asian Paints Q2 Results Review

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Asian Paints Ltd.’s Q2 FY23 print was disappointment across all fronts, mainly on margins front which was below ours and consensus estimates. Consolidated revenue grew by ~20% YoY (19% on a three-year compound annual growth rate) to Rs 8,458 crore, led by 10% volume and price growth each.

Asian Paints’ management highlighted extended monsoon impacted the projects and institutional sales (15-20% of sales) mainly in south and west region while growth remained intact in rural / tier-III/IV centers as it grew faster than urban/metros centers, which led to higher saliance of low margins economy emulsions and putty sales, while there was downtrading in luxury, premium and economy emulsions.

Sequentially, gross / Ebitda margins declined ~200/350 (up 98/180 bps YoY) bps to 35.7%/14.5% owing to high inflation (~8% in H1 FY23) against which company has under taken 3% price increase in H1 FY23.

Profit after tax was up 31% YoY to Rs 783 crore. Declared interim dividend of Rs 4.40/ share.

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