Asian Paints

This stock is currently the top loser on the BSE, with the market reacting to the disappointing set of Q3 numbers. India’s largest paint company posted a 2% (YoY) drop in consolidated net profit at Rs.329 crore on a 13% rise in total revenue at Rs.3452 crore. EBITDA was up 5% at Rs.537 crore. The market was more disappointed with the fact that its operating margin slipped to 14.6%, down 172 bps (YoY). This drop in margin was harder to digest. The overall sluggish rise in sales, coupled with a rise in costs – 73% surge in depreciation, 17% rise in raw material costs and 29% rise in employee cost pushed down the margins. The fall in profit would have been higher but for the Rs.21 crore tax refund it received from the Maharashtra Govt on its Khandala plant’s goods and expects such flows to continue.

What really pulled down the profits was the poor performance of the industrial paint segment, which continued to be impacted by sluggish manufacturing environment in the economy, with no major capex activity. Automotive coatings growth was affected due to the subdued demand in automotive sector. Decorative paint was the saving grace in this otherwise lackluster quarter. Internationally, Middle East was fine but the ongoing tensions in Egypt continued to affect business in the Middle East.