MOSL: ASIAN PAINTS (Neutral)-Impacted by GST-related challenges-RM costs pull down margins
​Asian Paints: Impacted by GST-related challenges; RM costs pull down margins
(APNT IN, Mkt Cap USD17.2b, CMP INR1150, TP INR1200, 4% Upside, Neutral)
- Asian Paints (APNT) reported consol. sales growth of 6.4% YoY (est. of +2%) to INR38.2b, with volume growth of ~4% (est. of flat growth) in the domestic decorative paints business. The quarter failed to build on a good start due to destocking ahead of GST implementation.
- Gross margin shrunk sharply by 430bp YoY (est. of +300bp) to 42.8%, mainly led by higher RM prices. Increase in RM cost, along with slightly higher other expenses (+80bp YoY) and employee expense (+20bp YoY), led to EBITDA margin contraction of 530bp YoY to 17.4% (est. of -200bp). Thus, EBITDA declined 18.5% YoY to INR6.7b (est. of -7%). Adj. PAT fell 20.4% YoY to INR4.4b (est. of -6%).
- Standalone performance: Net sales grew 7.3% YoY to INR32b. Gross margin shrunk by 470bp YoY to 43.8% and EBITDA margin by 580bp YoY to 18.6%. Thus, EBITDA fell 18.2% YoY to INR6b. Adj. PAT was down 20% YoY to INR4b.
- Subsidiary sales grew 1.5% YoY to INR6b, while EBITDA and adj. PAT declined 21% and 24% YoY, respectively.
Asian Paints is engaged in manufacturing of a range of decorative paints, varnishes, enamels, and black & synthetic resins. Co., through its subsidiaries, also manufactures specialty industrial chemicals and vinyl pyridine latex products which are used in the manufacture of rubber tires.
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