Shalimar Announces Q3 Results, Stock Up 20%

Shalimar Paints announced its Q3FY13 results post market hours on Monday, Jan 14, 2013. Having posted an impressive set of numbers, the company’s stock prices have seen an upswing of close to 20% today (Jan 15).

For the quarter, Shalimar Paints saw its revenues growing by 14.19% to Rs 143.78 crore on a yearly basis. Its operating profits saw a YoY growth of 15.58% to touch Rs 11.72 crore. Its net profit also increased by 24.40% to Rs 4.69 crore.

Financial Performance of Shalimar Paints in Q3FY13

The revenue increase was evidently coupled with improved efficiency in the quarter under review. While the margins of companies in the paint industry have been pressured for the last few quarters due to the soaring prices of Titanium Dioxide (TiO2), Shalimar has managed to tackle this issue and post an improvement of 10 basis points on its operating margin and 27 basis points on its net profit margin.

Several factors have guided our optimism on the Indian paint industry, such as the potential of volume growth, growth of water-based paints and the potential of real-estate growth. We had recommended Berger Paints (DSIJ Vol 27, Issue No. 25) and Asian Paints (DSIJ Vol 27, Issue No. 24) in our magazine, and since our recommendation, the returns on these stocks have been 15.60% and 12.24% respectively. These returns have been achieved in a period of two months for Berger Paints and two and a half months for Asian Paints.

Paint companies have been making increasing efforts to maintain their margins by improving the product mix, enhancing capacity and an overall improvement in operational efficiency. The results of these moves are visible in the financials posted by Shalimar Paints.

Thus, in view of the resilience shown by the sector and owing to the potential for growth in the paint industry, we maintain our bullish stance on the sector.