Asian Paints Q2 Review - Steep Inflation Impacts Bottom Line: IDBI Capital
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IDBI Capital Report
Asian Paints Ltd. (APNT) reported below expected results. While revenue growth continues to maintain strong momentum (came better than expected), steep inflation in input cost (worst in last 40 years as per management) significantly impacted gross and operating profits.
APNT has taken 4% price hike in Q2 FY22 to mitigate inflation. However, more aggressive price hikes are likely to be taken in next 2-3 months to reduce the overall impact. Management is confident of achieving 18-20% Ebitda margin in medium to long-term.
Adjacency businesses; water-proofing, kitchen and bath and home decor businesses are tracking well.
In international market; revenue growth in Africa and Middle East was sluggish due to challenges related to Covid and forex availability.
Overall; inflation is likely to persist and would be the primary challenge to address.
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