By Hritam Mukherjee
(Reuters) -India’s Asian Paints missed third-quarter profit estimates on Tuesday, but stronger-than-expected volume growth in its core domestic decorative business sent its shares up as much as nearly 6%.
Shares closed 2.7% higher at 2,354 rupees.
The company reported 1.6% volume growth in its domestic decorative segment, which includes paints, waterproofing coatings and wood finishes and forms nearly 90% of its revenue.
The 1.6% volume growth in the decorative business was higher than our expectations of 1% this quarter, said Antu Thomas, a research analyst at brokerage Geojit Financial Services.
Earlier this month Nirmal Bang said in a note it expected Asian Paints to report flat volumes in the quarter, while weak demand and increased competition could continue to pressure volumes in the sector.
Asian Paints has been grappling with intensified competition over the last few quarters following Grasim Industries’ entry in the sector, while inflation-strained shoppers tightened their purse strings and opted for cheaper private labels.
Strong volume growth, however, failed to cushion the hit from price cuts it took to attract cash-strapped customers.
The company’s profit fell 23% to 11.11 billion rupees ($127.6 million), while analysts, on average expected, 11.31 billion rupees, as per data compiled by LSEG.
Revenue dropped 6% to 85.49 billion rupees, below market expectations of 89.19 billion rupees.
“The paint industry continued to be impacted by subdued demand conditions during the quarter, especially in the urban centers… In the near term, we remain cautiously optimistic on a recovery in demand conditions,” said Managing Director and CEO Amit Syngle.
Asian Paints is the first among its peers to report quarterly results. Kansai Nerolac and Akzo Nobel India will report their earnings later this week.
($1 = 87.0690 Indian rupees)
(Reporting by Hritam Mukherjee in Bengaluru; Editing by Sherry Jacob-Phillips and Eileen Soreng)
