Asianpaint vs Britannia Q3 FY24

Asian Paints reported a strong Q3 FY24 with 12% volume growth in decorative business, driven by recovery in Tier 3/4 cities and robust industrial performance. Gross margins reached multi-year highs, aided by raw material deflation and price cuts of 1.3%. The company expects to sustain double-digit volume momentum despite potential election-related slowdown. Home décor business now contributes 4% of decorative revenue, targeting 8-10% over time. Kitchen and bath segments remain weak but improving. Key risk: geopolitical tensions could reverse raw material deflation and pressure margins.

Guidance read

Sustain double-digit volume growth: Management expects to sustain double-digit volume growth in decorative business, supported by recovery in Tier 3/4 cities and project business. PBDIT margin band of 18-20%: Company reiterated its PBDIT margin guidance of 18-20%, with plans to deploy higher marketing spends. Home décor to reach 8-10% of decorative revenue: Home décor business currently at 4% of decorative revenue; target is to reach 8-10% over time. Backward integration benefits from FY26: Cement project expected by Dec 2025, VAM/VAE projects 4-5 months later; benefits likely from FY26.

Risk read

Key risks include Geopolitical tensions could reverse raw material deflation — Management noted that geopolitical situations could make crude prices volatile, potentially reversing the deflationary trend and impacting margins.; Election-related slowdown in Q4 and Q1 FY25 — Management acknowledged that elections could cause lethargy in painting activity and deferment of demand in Q4 FY24 and Q1 FY25.; Weakness in kitchen and bath businesses — Kitchen business was flat, bath business declined 5% YoY. Despite being small, these segments have not grown as expected and remain unprofitable.; Global business headwinds in Nepal and Egypt — Nepal continues to be a worry with no turnaround expected in Q4; Egypt faces forex availability issues and currency depreciation..

Promise ledger

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

Britannia reported Q3 FY24 revenue of INR 4,192 crore, up 2% YoY, with operating profit margin of 17.7%. Volume growth was 5.5%, driven by premium portfolio gains, while pricing was negative ~3.5% YoY due to strategic price cuts. Rural demand remains sluggish, but urban growth outpaced rural. Management highlighted market share recovery after a flattish period, aided by distribution expansion to 27.6 lakh outlets and rural distributor count increase to 29,000. Cost efficiencies and soft commodity costs (palm oil, packaging) supported margins. Guidance focuses on aggressive top-line growth over margin expansion, with aspiration for double-digit volume growth. Risk: rising competition from regional players offering lower prices and higher trade margins could pressure market share and profitability.

Guidance read

Aspiration for double-digit volume growth: Management aims to return to double-digit volume growth, though not expected in the next quarter. Adjacent businesses to grow 50% faster than base: Non-biscuit categories (cakes, rusk, cheese, etc.) targeted to grow at least 50% faster than biscuits. Cheese business target of INR 1,000 crore in 5 years: Consumer cheese business aims to reach INR 1,000 crore in five years, driven by innovation and distribution. 19% EBITDA margin is peak; focus on profit growth via top line: Management indicated 19% EBITDA margin is aspirational peak; future focus on growing absolute profit through aggressive top-line growth.

Risk read

Key risks include Rising competition from regional players — Regional competitors are gaining share by offering lower prices and higher trade margins, which could pressure Britannia's market share and profitability.; Rural demand weakness — Rural consumption growth has slowed, and despite distribution expansion, rural growth is lagging urban, posing a risk to overall volume recovery.; Commodity price volatility — Global uncertainties (Russia-Ukraine, Gaza) could lead to renewed inflation in key inputs like wheat, sugar, and palm oil, impacting margins.; Price cuts may not fully offset volume growth — Sequential price cuts of 2-3% could pressure revenue growth if volume growth does not accelerate as expected..

Promise ledger

Scorecard data is being built as historical quarters are processed.