Shares of Asian Paints Ltd dropped over 3% in the afternoon trade on Thursday after the company reported a consolidated net profit of ₹1,097 crore for the quarter ended December 31, 2022.

While the paint maker's net profit rose 6.3% year-on-year, analysts expected a profit of ₹1,160 crore, according to Refinitiv IBES data.

Revenue from operations increased 1.3% year-on-year to ₹8,636.74 crore during the third quarter compared with ₹8,527.24 crore in the year-ago period.

Reacting to the lower-than-expected Q3 earnings, the Asian Paints stock fell nearly 3% to ₹2,850 apiece on the National Stock Exchange (NSE).

The domestic decorative business, which accounts for about 80% of the company's revenue, registered a flat volume and value sales delivery for the quarter, on a very high price increase base in the previous year.

The extended monsoon in October also affected retailing in the peak festival season, says Amit Syngle, managing director and CEO of Asian Paints.

However, demand picked up in November and December, leading to a double-digit growth for the decorative business in December.

"Overall, on a 9 month basis, the Decorative Business continues to grow at healthy double digit volume and value growths with strong CAGRs. The operating margins improved strongly on sequential basis as well as saw an improvement on a y-o-y basis driven by deflation in some of the raw material prices as well as continued work on driving operational efficiencies across businesses," says Syngle.

The company's industrial business did well, led by strong growth in the auto and general industrial segments, says Syngle. "The Home Décor market continued its expansion foray but witnessed some slowdown in the Bath and the Kitchen business this quarter. We continue to work diligently on multiple strategic initiatives to further strengthen our business model and deliver sustained value to all our stakeholders," he adds.

Sales in the bath fittings business decreased 10.9% year-on-year to ₹89.84 crore for the quarter ended December 2022. Sales in the kitchen business fell 7.1% in Q3 FY23 to ₹100.68 crore from ₹108.41 crore.

The company's international sales rose 2.1% year-on-year in the third quarter to ₹778.82 crore from ₹762.43 crore in the corresponding period last fiscal. In constant currency terms, sales increased by 13.4%.

Reported sales increase was lower than the increase in sales in constant currency on account of currency depreciation in key markets such as Sri Lanka, Egypt, Bangladesh, and Ethiopia, the company says.

"The International Business was a mixed bag with good growth in the Middle East and Africa while the South Asia market, especially Sri Lanka and Bangladesh, got severely impacted by the adverse forex & macro-economic conditions," says Syngle.

Asian Paints share price

Asian Paints stock falls 3% as profit misses estimates