Asian Paints Q4: Will demonetisation impact continue?

Asian Paints will be announcing its fourth quarter ended March 31, 2017 result later on Thursday. 

A ICICI Securities report stated that after note ban, overall decorative paint companies are expected to post high single-digit volume growth in the March quarter, except South, which may see only low single-digit growth in Q4.

In the previous three quarters of financial year 2016-17 for Asian Paints has been mostly positive. 

However, after reporting growth of nearly 19% in both Q1FY17 and Q2FY17 net profit, the company's net profit missed estimated in Q3FY17 wit just 1.5% year-on-year growth to Rs 489.31 crore after the note-ban.

The company's total income also saw marginal increase of 2.56% in Q3FY17 at Rs 4,353.99 crore compared to Rs 4,245.16 crore in the corresponding period of previous year.

Abneesh Roy, Tanmay Sharma, Alok Shah analysts at Edelweiss Financial Services said, " The impact of demonetisation will recede in Q4FY17 also helped by the fact that Asian Paints largely has direct distribution."

Although, all paint companies announced a price hike of 3% in later February 2017, their volume growth will not be impacted. 

The trio of Edelweiss said, "The company has taken 3% price hike starting March 2017 which will help pricing growth. We expect domestic volumes growth of 6-7% year-on-year (YoY) a base of 13% YoY growth (Q3FY17 volume growth was 2.5% YoY on a base of 14% YoY)."

While analysts at Motilal Oswal said, "We expect revenue to grow 4% to Rs 38.2b in 4QFY17, with 3% rise in domestic decorative volumes."

On crude prices, Edelweiss said, "Prices of Crude, TiO2 and other monomers have inched up which can have some impact on the margins but has seen a dip recently whose impact will come with a lag. Ess Ess and Sleek will see larger impact due to being more discretionary and higher ticket."

Motilal said, "The magnitude of price movement in crude derivatives is lower vis-à-vis crude prices. Operating margin is however likely to contract 20 basis points to 18.8% in 4QFY17."

Overall Motilal expects Asian Paints to report net profit of Rs 489.1 crore, up by 17.17% yoy and 4.91%. While net sales is seen at Rs 3,817.7 crore, a rise of 4.03% yoy but a decline of 3.03% qoq.