Rural Markets Drive Asian Paints’ Performance
Pent-up demand after the lockdown in Q1 and demand for economy paints in rural areas helped Asian Paints beat earnings estimates significantly in the July-September period. Its volumes in the key decorative paints business grew over 11% in the quarter, the management said in a call with analysts. What’s more, earnings before interest, tax, depreciation and amortization (Ebitda) jumped 32% year-on-year to ?1,265 crores, 10-12% higher than analysts’ estimates. Kotak Institutional Equities analysts, for instance, had estimated its Q2 Ebitda at ?1,120 crores. Volumes continued to be supported by demand for economy paints from rural areas ahead of the festive season. Dealer channel checks show demand for low-end interior and exterior paints increased in late June. According to dealers, except for west India, the sales momentum continued for such products in the quarter. In a post-earnings conference call, the management said decorative paints demand was supported by tier-II and tier-III markets. It’s little wonder that sales grew 6% in value terms, far lower than the 11% increase in volumes. The management refrained from giving any outlook on the sustenance of demand. However, the company is hopeful that a good monsoon and government support would continue to aid the rural economy.
Tags : ALLIED Asian Paints economy Markets Rural