Asian Paints Q3FY22 Preview: Mixed results expected; profits likely to take a hit despite strong revenue estimates

Asian Paints is likely to report mixed top and bottom line numbers on Thursday for the third quarter earnings of the financial year 2021-22 (Q3FY22), however, the margins for Q3 may contract amid rising input costs, several analysts believe in their earnings preview report. 

According to domestic brokerage house ShareKhan, the company’s adjusted profit may slip by over 21 per cent to Rs 992 crore in Q3FY22 as compared to Rs 1265 crore in the same quarter a year ago despite the revenue expected to see strong growth of around 23 per cent to Rs 8334 crore in Q3FY22 from Rs 6788 crore in a year ago quarter. 

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“Consumer goods companies, including Asian Paints, would post lower sales volume affected by slowdown in rural demand, while Raw-material inflation will continue to affect profitability, which will lead to lower PAT (profit after tax) growth,” the brokerage house said in a preview report. 

Meanwhile, Motlial Oswal expects 15 per cent YoY volume growth and expect gross margins to improve sequentially due to sharp price hikes taken in December-end quarter.  

According to Motilal Oswal’s earnings preview report, the company may see a dip in YoY profit down by 4.3 per cent to Rs 1211 crore in Q3FY22 versus Rs 1265 crore a year ago quarter, while the net sales of the company to come at Rs 8825 crore, up 30 per cent YoY during the quarter. 

The EBITDA margin of paint major to also see a dip of 230 basis points to 19.8 per cent from 26.3 per cent YoY, the brokerage house mentions, urging further to watch out for management commentary on the demand outlook of the company. 

Motilal sees a marginal growth in the share price of Asian Paints setting a target of Rs 3540 per share, while ShareKhan urges investors to Buy for good returns.