The July-September quarter earnings of Asian Paints will be out on October 22 and most brokerage firms are expecting the company to report a healthy set of numbers.

While the numbers will show how the company fared in the quarter gone by, brokerages say demand scenario across urban and rural areas, market-share trends, outlook for key raw materials, commentary on pricing action and the timeline on profitability in the Sleek and Ess Ess businesses will be the key monitorables after the Q2 results are unveiled.

Brokerage Edelweiss Securities anticipates Asian Paints' revenue to increase 10 percent year-on-year (YoY) to Rs 5,101.6 crore against Rs 4,639.1 crore in the corresponding quarter of the previous financial year.

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) is expected to grow 30.1 percent YoY to Rs 1,020.3 crore and profit after tax (PAT) may grow 31 percent YoY to Rs 662.9 crore, Edelweiss Securities said.

"Lower effected tax rate of 25.2 percent announced by the government, as against 32.8 percent in Q2FY19, will lead to PAT growing ahead of EBITDA," Edelweiss said.

Volume growth may have softened during the second quarter of FY20. Edelweiss expects Asian paints to report nearly 8 percent YoY volume growth on a base of 11 percent. Q1FY20 saw nearly 16 percent volume growth on a base of 12.5 percent.

The brokerage believes effective price hike translation for Asian Paints will be nearly 2 percent even as the price hike in the paints has been about 4 percent YoY.

On the COGS (cost of goods sold) front, prices of crude -linked raw materials like TiO2 and other monomers have declined sharply on YoY basis, which should aid in gross margin expansion that will flow through to the EBITDA margin.

Motilal Oswal Financial Services expects a 13 percent YoY growth revenue at Rs 5,242.1 crore, with nearly 9 percent volume growth in the domestic decorative business.

EBITDA can see a YoY rise of 25 percent to Rs 980.4 crore and the net profit may climb 10.8 percent YoY to Rs 560.8 crore.

"We note that crude prices were down 17.8 percent YoY and 9.7 percent QoQ in Q2FY20. The magnitude of price movement in crude derivatives is lower and comes with a lag vis-à-vis crude prices," said Motilal Oswal.

The brokerage firm expects gross margins of Asian Paints to expand 350bp YoY to 43.3 percent and operating margin is likely to expand 180bp to 18.7 percent, with EBITDA increasing 25 percent YoY.

Kotak Securities expects continued resilience in decorative paints volume growth, partly aided by unorganised-to-organised shift after July 2018 GST rate cut, especially in the low-value products.

"We model 14 percent YoY growth in domestic sales led by 12 percent volume growth and 2 percent price or mix-led growth," Kotak Securities said.

The brokerage firm anticipates a 37 percent (adjusted for Ind-AS 116) YoY growth in EBITDA on LFL (like for like) basis.

"Net profit growth would be much higher owing to the effective tax rate (ETR) cut and associated reversal of Q1FY20 taxes. We model 16.3 percent ETR in the India business (standalone) for Q2FY20, translating into about 25.2 percent ETR for the first half of FY20," said Kotak Securities.

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