Asian Paints: Q1FY19 Steller performance

Asian Paints Ltd Q1FY19 net sales grew 15.1% YoY to ₹4390.3 crores v/s Rs 3815.2 cr and EBITDA grew 31.4% YoY to ₹665.4 crores. EBIDTA margin expanded by ~250 bps YoY to 19.9%. PAT for the company grew by 30.6% YoY to Rs 558.0 crores. PAT margin expanded by ~150 bps YoY to 12.7%.

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What’s good about the company?

  • The GST rate reduction from 28% to 18% on paints was a good move for the company which should help the company to build small demand from the small customers.
  • The decorative paint business in India registered good double digit volume growth in Q1FY19 which was helped to an extent by low base of the previous year.

Challenges faced by the company

  • The company is witnessing a continuous increase in raw material prices and expect an inflation of almost 10% in the second quarter. It has passed on only a part of this impact through the cumulative 3.3% price increases taken in March’18 and May’18.
  • Overall, the international operations faced challenging conditions with issues like forex unavailability, difficult weather conditions impacting the business performance.

How does it fare against peers?

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Asian Paints Ltd (CMP: Rs 1466, M.cap: Rs 140618 cr) is trading at PEG ratio of 3.08 over the period FY18-20 and ROE of 29.3%.

 

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