Asian Paints slips over 1.5% ahead of Q2 result; here's what to expect

Volume growth, JV performance, and gross margin trend will be the key focus areas.
Shares of Asian Paints slipped as much as 1.53 per cent to Rs 2,082 apiece in the morning trade on the BSE ahead of its September quarter result due later in the day. 

At 10:31 AM, the stock was trading nearly a per cent lower at Rs 2,095 against Tuesday's close of Rs 2,114.35. In comparison, the S&P BSE Sensex was trading 190 points, or 0.47 per cent lower at 40,517 levels. 

For the quarter under review, analysts at IDBI Capital expect a strong recovery in the decorative coatings business compared to 1QFY21 led by less stringent lock-down provisions by the government. Overall, the brokerage expects business to reach nearly 90 per cent of pre-covid levels.

It estimates revenue of the company to come in at Rs 4,495.8 crore, down 11 per cent year-on-year (YoY) and up 53.8 per cent quarter-on-quarter (QoQ). Earnings before interest, taxes, depreciation, and amortisation (EBITDA) is estimated at Rs 786.8 crore, down 17.6 per cent YoY while on a sequential basis, the numbers are seen growing 62.5 per cent. 

"Titanium dioxide rutile price declined by 4 per cent YoY during 2QFY21. Consequently, we expect gross margin to expand by 106 bps YoY to 43.5 per cent. Due to operating leverage benefit, the EBITDA margin is likely to improve by 93 bps QoQ to 17.5 per cent," IDBI Capital said. 

Net profit or profit after tax (PAT) is expected to come in at Rs 486.2 crore, up 122.6 per cent QoQ but down 41 per cent YoY. 

Volume growth, JV performance, and gross margin trend will be the key focus areas. 

Edelweiss Securities expects revenue and EBITDA to grow 7 per cent YoY and 18.9 per cent YoY to Rs 5,405.2 crore and Rs 1,135.1 crore, respectively while net profit is expected to dip by 11.4 per cent YoY to Rs 748.3 crore on account of tax reversal in the base quarter.

"We expect the run rate of June to continue and the company to clock 13 per cent volume growth on a base of 14 per cent (Q1FY21 saw 36 per cent volume dip on a base of 16 per cent)," the brokerage added.


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