Paint major Asian Paints on Thursday reported a 1.7 percent year-on-year (YoY) drop in consolidated net profit of Rs 487 crore for the fourth quarter ended March 2019. The consolidated revenue of the company surged 11.7 percent to Rs 5,018 crore as compared to Rs 4,492 crore in the same quarter last year.
Abneesh Roy, senior vice president, Edelweiss Securities, decodes Asian Paints Q4 numbers.
Asian Paints has missed the margin due to higher ad spends on account of Indian Premier League (IPL), Roy said.
“This time IPL has shifted from Q1 to Q4 and that is why IPL’s advertising spends which are quite high for Asian Paints has come in March. Of course, because of the two factories in Vizag and Mysore, there will be an upfront cost which is on the higher side because revenue comes with a lag,” he said.
The capacity ramp-up in these factories will improve the company's margin over the long term as it will help reduce logistic cost because they are closer to the market.
In the stock, Roy said, “I do not see double-digit volume growth being a challenge even in FY20.”
“Yes, we are aware of the challenges in terms of demand. In the last 7-8 years, in most years paint companies have given double-digit volume growth. Therefore, I would say the miss is more in terms of margins because of the IPL, Vizag and Mysore cost which has come into the picture. Volume growth still reasonably fine,” added Roy.