Asianpaint vs Britannia Q2 FY25

Asian Paints reported a muted Q2 FY25 with decorative volume growth flat and value declining 6.7% YoY, impacted by weak consumer sentiment, extended monsoons, and intense competition. Consolidated revenue fell 5.5% YoY, with industrial business growing 6% partially offsetting. Gross margins contracted 280bps due to raw material inflation and unfavorable mix, while PBIT margins dropped 530bps to 16.4% from higher employee costs and discounting. Management guided for single-digit volume growth in H2, with cautious near-term outlook due to a high base and muted October. Risks include sustained competitive intensity, potential crude volatility, and slower-than-expected demand recovery. The company is investing in brand refresh, innovation (12% revenue from new products), and dealer ROI initiatives to drive long-term growth.

Guidance read

Single-digit volume growth for FY25: Management expects single-digit volume growth for the full year, with H2 likely to see improvement in Q4. PBIT margin band of 18-20% for H2: Management aims to keep PBIT margins in the 18-20% range for H2, supported by price increases and potential raw material deflation. Price increase of 1.2% to fully reflect in Q3: The 1.2% price increase taken in Q2 will fully impact Q3, aiding margin recovery.

Risk read

Key risks include Sustained competitive intensity — Existing and new players are increasing discounting and dealer incentives, potentially pressuring market share and margins.; Raw material cost volatility — Crude oil and titanium dioxide prices remain uncertain due to geopolitical tensions, which could delay expected deflation.; Slower demand recovery in H2 — Management is cautious on Q3 due to a high base and muted October, with recovery dependent on wedding season and government spending.; Impairment and forex losses — Exceptional items of ~₹256 crore (impairment of White Teak/Weatherseal and Ethiopia forex loss) indicate challenges in home décor and international operations..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.

Britannia reported Q2 FY25 revenue of INR 4,566 crore, up 4.5% YoY, with volume growth of 8%. EBITDA came in at INR 707 crore, down 12% YoY due to high raw material inflation (palm oil +45% QoQ, wheat, cocoa). Management highlighted a tough demand environment, especially in metros, driven by housing cost inflation and wage stagnation for non-salaried workers. The company plans 4-5% price increases over the next two quarters to offset cost pressures, while doubling down on cost efficiency programs. Route-to-Market 2.0 pilots in 25 cities show promise, with full rollout expected in 12-15 months. Innovation contributes 2% of revenue. Key risk: sustained inflation could compress margins further if price hikes are not fully absorbed by consumers.

Guidance read

Price increase of 4-5% over next two quarters: Management plans to implement 4-5% price hikes across the portfolio, primarily in large SKUs, to offset raw material inflation. Route-to-Market 2.0 full rollout in 12-15 months: Pilot in 25 cities covering 44 distributors and 50,000 outlets showing encouraging results; full implementation expected to cover 100 cities and 4.5 lakh outlets. Cost efficiency programs to overachieve targets: Management is doubling down on cost efficiency and value engineering projects to mitigate inflation impact.

Risk read

Key risks include Sustained raw material inflation — Palm oil, wheat, and cocoa prices remain elevated; import duties on palm oil may persist, pressuring margins.; Volume impact from price increases — Analyst raised concern that 4-5% price hikes could dampen volume growth; management acknowledged balancing act but no specific elasticity provided.; Urban demand weakness in metros — Metro slowdown attributed to housing cost inflation and wage stagnation for non-salaried workers; management hypothesis but no quantified impact on sales.; Competitive intensity from regional players — Smaller players expanding territories with aggressive pricing; management expects cleanup but near-term share pressure possible..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.