Comments
Centrum Broking
Asian Paints (Buy)
Target: ₹1,916
CMP: ₹1,759.60
Asian Paints Q1-FY21 results came below our expectations, wherein consol. revenue, EBITDA and PAT declined of 42.7 per cent, 58.2 per cent and 66.5 per cent respectively. Volume decline was lower at approximately 31 per cent led by product mix and driven by higher demand for low price emulsions in tier 2/3/4 markets. However, the company has maintained its focus on rural distribution.
The industrial businesses joint venture AP-PPG/PPG-AP and home improvement witnessed sluggish demand. International business growth was supported by Africa and Middle East while Indian subcontinent region was impacted due to pandemic lockdowns.
Further gross margin expanded 110 bps, yet EBITDA margin declined to 16.6 per cent (-611 bps) led by negative operating leverage. We reckon its strategy, communicating safe painting gaining consumer confidence, strengthening rural coverage and developing products meeting customer needs would yield better revenues in the medium-term. Further, management said down-trading is visible in paint industry. Nonetheless, its focus on driving volume and gain market share from local players may get momentum in FY21. Considering tailwinds from benign RM cost (Crude oil) we have increased FY21/22 PAT by 0.7 per cent/4.4 per cent.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.