Asian Paints, the market leader in the Indian paints segment, has reported a marginal fall in sales and profits for 2QFY02. Operating margins have also fallen by 50 basis points in the current quarter due to a subdued demand scenario.
Operating Profit (EBDIT)
Operating Profit Margin (%)
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No. of Shares (eoy) (m)
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The fall in sales is primarily due to the seasonal nature of the paint industry. Due to a late Diwali season in the current financial year, sales and profits for the quarter and half year ended 30th September, 2001 were subdued. Since 2QFY01 was the festive season, the company reported a 27.7% rise in sales and as a result overall volume growth is on the lower side. Nevertheless, paint demand has slowed down in the current year (against the industry growth rate of 12% last year, paint demand is expected to increase by 6%-7% in the current year). But we expect the company to report around 16%-18% growth in sales in the third quarter of the current year.
The subdued demand scenario and increased competition has resulted in a marginal fall in operating margins by 50 basis points to 15.8% in 2QFY02. The rise in other income is primarily on account of higher rentals from dealer tinting machines, which the company plans to increase by around 800 in the current year.
The fall in net profits would have been higher if not for a 26.7% fall in interest costs. Tax liability has increased due to a higher provisioning for deferred taxation.
The scrip is currently trading at Rs 267 on a P/E multiple of 16.9x the annualised 1HFY02 earnings.
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