Asian Paints sees recovery but sustenance in doubt

While Asian Paints Ltd is seeing recovery in decoratives sales across premium and economy product segments, there is scepticism about the pace of revival sustaining after the festival season, especially for high-end paints. India's largest paint maker is uncertain if the demand recovery will uphold.

Unlocking of the economy, pent-up demand and restocking of inventory by vendors ahead of the festival season underpinned the double-digit growth in the company's decoratives volumes for the September quarter. While the company said some luxury and emulsion-based paints have seen customers opt for higher-end products, some analysts cautioned that these trends could only be due to the festival demand.

The sustenance of double-digit volume growth is crucial at this point, given the expensive valuations, the stock is trading at, said an analyst at a local brokerage. Business in metropolitan and tier-I cities recovered sequentially but is well below pre-pandemic levels, the company said.

The recovery in demand was led by tier-II and tier-III cities. The rising number of coronavirus infections is still a worry in some regions as it may affect consumer sentiment and movement of labour, it said.

The company remains focussed on improving formulation and operational efficiency to improve profitability, even for primers and putties, Managing Director and Chief Executive Officer Amit Syngle said in a conference call. On Thursday, shares of the company ended 0.7% lower at 2,099.90 rupees on the National Stock Exchange. The company reported a 1% on-year rise in consolidated net profit at 8.3 bln rupees for Jul-Sep, surpassing the estimate of 6.9 bln rupees.

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