Asian Paints - Q2FY21 First Cut - ICICI Securities

(CMP: Rs. 2100; MCap: Rs. 2,01,138 crore)

Asian paints performance was in line with our estimates on the revenue front, however the EBITDA margin and bottomline was much ahead of the expectation led by better gross margin and savings in other expenditure.

Q2FY21 Earnings Summary

- Asian paints consolidated revenue increased by ~6% YoY to ~Rs. 5350 crore (inline with I-direct estimate) led by ~10% YoY volume growth in the decorative segment. Strong pent up demand post ease in lockdown restrictions across the regions have helped drive the volume growth during Q2FY21

- As expected, gross margin increased by ~197 bps YoY led by benign raw material prices. Additionally, saving in other expenses (down by ~300 bps YoY) helped sharp expansion in EBITDA margin by 474 bps YoY to 23.6% (Vs I-direct estimate: 20.6%)

- Despite higher tax outgo, the reported PAT at ~ Rs. 852 crore was ahead of our expectation of Rs. 743 crore led by expansion in EBITDA margin

We believe, Asian paints has recorded better than expected performance on the profitability front during Q2FY21 given the challenging demand scenario with low discretionary spends. The double digit volume growth in the month could be on account of pent up demand across the regions as per our dealer check, barring western markets. Asian Paints, with its robust dealer network (~60,000 +) and strong supply chain is well placed amongst competitors to gain market share. We will come out with detailed report post concall.

Shares of ASIAN PAINTS LTD. was last trading in BSE at Rs.2100.25 as compared to the previous close of Rs. 2114.35. The total number of shares traded during the day was 66138 in over 5903 trades.

The stock hit an intraday high of Rs. 2114.95 and intraday low of 2078. The net turnover during the day was Rs. 138467400.

Source : Equity Bulls

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