Why are Asian Paints profits falling this quarter? What should I do as an investor; should I buy shares of Asian Paints?

For the March quarter, Asian Paints reported a small 1.7% fall in profits to Rs.488 crore. However, the revenue growth continued to be strong at 11.7% in the quarter at Rs.5018 crore. The basic reason for the fall in the profit was that its EBITDA fell by 2.33% due to higher raw material cost and higher marketing expenses. Crude oil in an important raw material for paint and since crude prices have gone up in the quarter from $51/bbl to $70/bbl, it has resulted in higher cost of operations for Asian Paints. That is why the profits of the company are down in the quarter. Among the various segments, the home paints division and industrial paints did very well. The main problem was weak growth in automotive paints because of weak auto demand.

The stock of Asian Paints is currently quoting at Rs.1335. At a full year EPS of around Rs.22, the stock is quoting at around 55X past earnings. Effectively, this is the kind of valuations that Asian Paints has always commanded due to its premium brand position. However, the monsoons will be starting soon and that is a weak period for paints demand. Hence you could lower prices during this period and post that the stock normally moves up on festival demand through the end of the year. You can look to get a better price to buy this stock later.