Asian Paints Q1FY23 Results preview: Brokerages expect over 60% jump in profit, margins under pressure
The brokerage expects 26 per cent YoY volume growth and gross margin to decline YoY and QoQ due high inflationary environment albeit offset to some extent by a better mix.
Index heavyweight Asian Paints is slated to report robust first-quarter earnings of the financial year 2022-23 (Q1FY23) on Tuesday, July 26, 2022. The paint major is likely to register double-digit year-on-year (YoY) growth in both the top and bottom line, while the volume is also likely to improve in Q1FY23.
According to Motilal Oswal estimates, highest of all, the profit to surge by 65 per cent YoY to Rs 950 crore, and revenue may jump by 40 per cent YoY to Rs 7,820 crore in Q1FY23.
The brokerage expects 26 per cent YoY volume growth and gross margin to decline YoY and QoQ due high inflationary environment albeit offset to some extent by a better mix. It suggests to watch out for commentary on the raw material cost inflation and demand outlook post the price hikes.
Similarly, ShareKhan believes the paint company to report over 61 per cent YoY growth in profit to Rs 926 crore, while revenue may surge by 47.5 per cent YoY to Rs 8237 crore in the June-end quarter.
In Q1FY23, the consumer goods sector will be affected by higher inflation in commodity prices that would hit domestic demand and put pressure on profitability in the short term, ShareKhan said.
Among categories, paints and liquor companies will register strong growth on the back of the low base of Q1FY22, steady demand, and price hikes undertaken to mitigate pricing pressures, the brokerage further said, adding that the raw material inflation would put pressure on the margins.
While Equirus Securities also see profit growing around 61.5 per cent YoY to Rs 930.1 crore, while revenue may surge by 33.6 per cent YoY to Rs 7,463.9 crore in Q1FY23.
“We expect the domestic decorative paints' volume growth to be in mid to high single digits with a positive impact of pent-up demand flowing in 1Q,” Equirus Securities said in expectations.
Strong sales growth would be pricing-led, focus on the economy segment and market share gains, and gross margins likely to improve sequentially, despite inflation in prices of key raw material, due to price hikes partly offset by unfavorable product mix, the brokerage further said.
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