(Reuters) – Paint maker Akzo Nobel India reported a lower third-quarter profit on Friday as rising costs pressured margins.
The ‘Dulux’ paint maker reported a 5% fall in consolidated net profit to 1.09 billion rupees ($12.47 million) in the October-December quarter.
The firm, a unit of Netherlands’ Akzo Nobel, said its revenue from operations increased 2% to 10.51 billion rupees, but this was slower than the 3% rise in revenue for the previous quarter.
Its cost of raw materials consumed rose 11%, pushing its total expenses 2.3% higher to 9.10 billion rupees.
This led to a 2% contraction in margins on earnings before interest and tax (EBIT) compared to an expansion of 3% in the second quarter.
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KEY CONTEXT
Printmakers saw weak demand from retail consumers who are choosing cheaper brands in the face of high inflation, according to analysts.
Demand forecasts by paint companies have been mixed so far.
While market leader Asian Paints missed earnings estimates and issued a grim demand outlook, Kansai Nerolac posted a marginal rise in profit due to higher automotive demand. It expects the government’s plan to boost domestic consumption to revive demand.
Grasim Industries and Berger Paints will report their results next week.
PEER COMPARISON
Valuation (next 12 Estimates (next 12 Analysts’ sentiment
months) months)
RIC PE EV/EBITDA Revenue Profit Mean No. of Stock to Div
growth (%) growth (%) rating* analyst price yield
s target** (%)
Akzo Nobel India 34.66 22.34 8.50 9.69 Buy 2 0.86 3.07
Asian Paints 47.02 31.96 5.60 3.03 Hold 34 0.92 1.43
Kansai Nerolac 27.74 17.50 7.54 11.84 Hold 12 0.84 0.98
Paints
Berger Paints India 43.02 27.22 9.54 9.20 Hold 20 0.93 0.74
* The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
OCTOBER-DECEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 87.4010 Indian rupees
(Reporting by Hritam Mukherjee and Ashna Britto in Bengaluru)
