Q3 Results: Asian Paints Meets Estimates On Higher Volumes

Asian Paints Ltd.’s quarterly numbers met estimates, led by higher volumes.

Net profit rose 14.6 percent year-on-year to Rs 636 crore in the quarter ended December, according to the paintmaker’s exchange filing. That compares with the Rs 619-crore consensus estimate of analysts tracked by Bloomberg.

The bottom line could have been higher had the company not incurred a deferred tax expense of Rs 41 crore in the reporting period, compared with Rs 2 crore in the base quarter. The leap in the deferred tax expense may have come from the income tax exemptions related to some of its old plants that were not there in the December quarter, according to Harit Kapoor, research analyst at IDFC Securities.

The company’s revenue jumped 24 percent on a yearly basis to Rs 5,294 crore. That’s higher than the Rs 4,886 crore estimate. The operating income, or earnings before interest, tax, depreciation and amortisation, rose 17 percent over last year to Rs 1,043 crore. Its margin fell to 19.7 percent from 20.9 percent a year ago, according to the company’s press release, due to higher raw material prices.

Asian Paints’ volume in the domestic decorative business grew at its fastest pace in nearly 8 years in the third quarter. The company reported a 21 percent growth in volumes, the highest since December 2010, according to Motilal Oswal. This is also the fourth straight quarter of double-digit growth in volumes.

“The strong growth in volumes aided by a shift in festive season to the previous quarter was broad-based across categories and regions,” said Amit purohit, associate director at CIMB.

The demand, however, remained subdued for the automobile segment, the company said in a statement. While some of its key units overseas witnessed challenging business conditions, its home improvement and decor space—Sleek (kitchen) and Ess Ess (Bath fittings)—continued to expand network and enhanced portfolio, it said.

While the management does not see any impact of a slowdown in discretionary demand, they remain cautious with respect to the outlook for demand in the near term owing to the general election.

Shares of Asian Paints were down 0.75 percent compared with a 0.51 percent fall in the NSE Nifty 50 Index after the results announcement.