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Asian Paints' strong volume growth continues in Q3FY22

ICICI Securities 20 Jan 2022

Buzzing:

Asian Paints reported strong revenue growth of 26% YoY led by strong volume growth of 18% YoY. Series of price hikes helped in a sequential improvement in EBITDA margin.

Context:

Asian Paints reported a strong decorative segment volume growth of 18% YoY in Q3FY22 even on a strong base of last year. The company has been delivering double digit volume growth in the the last five quarters despite various supply disruptions amid pandemic. Further, the industrial coatings business also registered robust double digit revenue growth, especially in the protective coatings segment. The home improvement business continued its streak of healthy growth (up 36% YoY). International business registered 9% value growth amid various challenges. On the margin front, EBITDA margin improved sequentially by 535 bps (down ~825 bps YoY) led by aggressive pricing action taken by company. The company has taken YTD price hike of ~20% to offset raw material cost pressure (most of this came November). Net profit at Rs 1026 crore came in better than our estimate of Rs 921 crore, down 18% YoY.

Our perspective:

We believe strong volume growth and a sequential recovery in the EBITDA margin were key positives of Asian Paints’ Q3FY22 result. The aggressive price hikes taken by the company were to offset raw material cost pressure. We believe the full impact of price hikes will be visible on EBITDA margin from Q4FY22 onwards. We remain positive on Asian Paints as the company is the market leader in the decorative paint segment and it is one of the biggest beneficiaries of a shortening of repainting cycle and revival in the real estate industry.

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