Dolat Capital: Asian Paints’ Double-Digit Volume Growth In June Exudes Confidence  

Dolat Capital Report

Asian Paints Ltd.’s Q1 FY21 revenues, Ebitda and after profit after tax came below our estimate due to delayed pick-up in demand compared to our expectation. Nevertheless, double digit volume growth (up 14%) in June 2020, was a key positive. We believe overall volume de-growth in domestic decorative business was 38% in Q1 FY21.

International business posted mixed results as better performance in Africa and Middle East was offset by Covid-19 led slowdown in Nepal and Bangladesh.

Considering mixed impact of double-digit exit rate for the quarter and lockdowns in few states in July, we believe that growth would normalize in H2 FY21E.

We believe that the volume growth in the decorative segment should remain high, especially in rural areas, given better crop production this season. Further, ongoing government investments in rural infrastructure, and house construction in rural areas should partially mitigate overall slowdown.

In the long term, we remain optimistic about the paint industry, considering an expected shift from the unorganised to organised sector. Asian Paints being a leader in the category, is likely to benefit the most from the shift.

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