Asian Paints Reports Lower Than Expected Q4 Results, Profit 22.9% Below Estimates

Asian Paints reported results were much lower than estimated, while revenue was 1.3% lower, EBITDA and net profit performance were 6.6% and 22.9% lower than our estimates.

- India decorative business volume growth was 1.8% YoY, largely similar to the preceding quarter (+1.6%) and the value decline was 5.2% impacted by persistent slowdown in demand coupled with downtrading and increased competition. The gap between volumes and value narrowed to 5.2% vs. 7.8% in Q3, reflecting some improvement. Industrial business grew 6.1%, led by general industrial and automotive segments.

- Revenue declined by 4.3% YoY to Rs 83,589 mn. The gap in volume/value has narrowed slightly.

- International revenue (in INR terms) declined by 1.5%, due to headwinds from challenging macro environments in Africa, while Middle east and Asia did well.

- EBITDA margin contracted by 219 bps YoY/ 196 Bps QoQ to 17.2%, 97 bps lower than estimated, due to increased other expenses even as gross margins improved. Absolute EBITDA for the quarter stood at Rs 14,362 mn, declining by 15.1% YoY/ 12.3% QoQ.

- PBT before exceptional items was 16% lower than estimated, due to higher depreciation costs and lower other income.

- PAT of Rs 6,921 mn was lower by 44.9% on a YoY basis and 37.7% QoQ majorly due to exceptional items of Rs 1,829.6 mn towards its divestment in Indonesian subsidiaries and impairment loss on goodwill, and a higher ETR.

- In summary, the reported PAT was impacted due to adverse numbers across several line items- operating as well as non-operating.

The stock is currently trading at 45.2/39.6x FY25/26/27E EPS. We have a BUY rating on the stock with a target price of Rs 2,715. We will review our price target and rating post the conference call.