Asian Paints TOP gainer on Nifty: Stock hits new high - Details highlighted for Investors

Asian Paints was trading on Tuesday at Rs 3026, up Rs 75 or 2.6%. Asian Paints share price made new life high of Rs 3033 on June 15. Asian Paints market cap is 2.9 lk cr. Asian Paints is the leader in the paint industry, followed by Berger Paints, Kansai Nerolac, Akzo Nobel, Shalimar Paints and other peers in the Industry. The stock also emerged as the top gainer on Nifty today.

Sharekhan says that Asian Paints registered strong volume led performance in Q4FY2021 with revenues growing by 44% to Rs 6651 cr and PAT growing by 81% to Rs 870 cr. Strong volume growth momentum was sustained in the decorative paints business for the third consecutive quarter. It stood at 48% in Q4 as against street expectations of 30-35%.

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Sharekhan explains that Revenue growth in the decorative paints business stood at 46% and the gap between volume and value reduced to 2% from 5-6% in earlier quarters mainly on account improvement in mix due to recovery in urban markets, which saw good demand for premium products. International business registered 24% growth in Q4 with double digit growth in most of the key geographies.

Sharekhan added that overall, despite a loss in April 2020 due to the nationwide lockdown, Asian Paints registered a high single revenue growth of 8% (with volume growth of 13% in decorative paints) on the back of strong sequential recovery. April 2021 started on a good note with momentum sustained both in rural and urban markets. Asian Paints management is confident of seeing a strong recovery once the second wave minimises in most of the markets. Third consecutive year of expected better monsoon and government focus on improving rural prospects will lead to a strong recovery in rural markets.

Further, a steady volume growth momentum may be maintained for the medium term, which will be driven by:

1) strong growth in Tier-3 & -4 markets (as consumer’s shifting to branded products and upgrading to emulsions from distempers
2) expansion in product portfolio that create more options for urban consumers to improve their homes
3) waterproofing and undercoats is gaining strong traction due to lower quality of construction

Asian Paints Key positives:

Volume growth of the decorative paints business stood at 48% (on normal base was 30%)
Home improvement business grew by 2x in Q4; auto business continues to see sequential improvement
Losses in the kitchen business and Bath business reduced substantially yoy due to an increase in the scale of business in FY2021
The company paid a dividend of Rs. 17.5 per share for FY2021 (dividend payout of 53%)

Asian Paints Key negatives:

Significant increase in raw material prices (including crude derivatives) led to 266 bps YoY and 190 bps qoq