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Asianpaint Ltd — Q1 FY25
Asian Paints reported a challenging Q1 FY25 with standalone revenue declining -3% YoY and volume growth of 7% (vs 10% last year), missing the double-digit target.
bearish
high
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Asian Paints reported a challenging Q1 FY25 with standalone revenue declining -3% YoY and volume growth of 7% (vs 10% last year), missing the double-digit target. The weak performance was driven by heatwaves, general elections, and adverse product mix (higher share of lower-margin economy products). Gross margins contracted to 42.9% due to raw material inflation and mix. Management noted a recovery in June and expects double-digit volume growth in Q2, aided by festive demand and rural uptick. However, employee costs surged 23% YoY due to hiring for distribution expansion, pressuring EBITDA. Risks include sustained input cost inflation (1.8% in Q1, further 1.5% expected) and potential demand slowdown in real estate. The company has taken a 1% price hike and may take more, but the value-volume gap is expected to remain at 5-6%.
एशियन पेंट्स की पहली तिमाही (अप्रैल-जून 2024) में कमाई घटी। कंपनी की बिक्री पिछले साल की तुलना में 3% कम रही, जबकि बेचे गए उत्पादों की संख्या (वॉल्यूम) 7% बढ़ी, जो 10% के लक्ष्य से कम है। कमजोर प्रदर्शन की वजहें: भीषण गर्मी, चुनाव, और सस्ते उत्पादों की ज्यादा बिक्री। कच्चे माल की बढ़ती कीमतों से मुनाफा घटकर 42.9% रह गया। कंपनी को उम्मीद है कि त्योहारों और गांवों में मांग बढ़ने से दूसरी तिमाही में वॉल्यूम दो अंकों में पहुंच जाएगा। लेकिन कर्मचारियों के खर्च में 23% की बढ़ोतरी हुई है। कंपनी ने कीमतें 1% बढ़ाई हैं, और आगे भी बढ़ा सकती है। फिर भी, कीमत और वॉल्यूम के बीच 5-6% का अंतर रहने की संभावना है।
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Sustained raw material inflation
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Volume Growth
7%
-3pp YoY
Volume growth decelerated from 10% in Q1 FY24 to 7% in Q1 FY25, missing double-digit target.
Retail Touchpoints
1.65L
+5K QoQ
Distribution network expanded to 1.65 lakh retail touchpoints, supporting rural penetration.
NPD Contribution
12%
flat YoY
New product development contributed 12% to top line, consistent with prior periods.
Beautiful Homes Stores
61
+15 YoY
Store count increased to 61, driving growth in kitchen and bath categories.
What Changed vs Last Quarter
NEW
Further price increases of ~1.5% expected
Management anticipates additional raw material inflation of 1.4-1.5% in Q2 and will take further price hikes accordingly.
UPDATED
Double-digit volume growth expected in Q2 FY25
Management expects volume growth to return to double digits in Q2, driven by festive season and rural recovery.
UPDATED
Value-volume gap to remain at 5-6%
The gap between volume growth and value growth is expected to stay in the 5-6% range, aided by price increases and mix improvement.
DROPPED
PBDIT margin guidance maintained at 18-20%
Management reiterated its medium-term PBDIT margin guidance of 18-20%, with levers including supply chain efficiencies and backward integration.
DROPPED
Neo Bharat launch to boost economy segment
The new latex-based product priced at distemper level is expected to drive significant volume growth in the bottom-of-pyramid market.
NEW RISK
Employee cost overhang
Employee costs surged 23% YoY due to hiring for distribution expansion, and management indicated these costs will persist, potentially weighing on EBITDA margins.
NEW RISK
Adverse product mix from rural growth
Higher growth in economy segments (distempers, Neo Bharat) and slower premium sales could continue to drag value growth and margins.
RISK GONE
Down-trading from premium to economy segments
Q4 saw some down-trading, especially in rural areas, which could persist if inflationary pressures continue, impacting product mix and margins.
RISK GONE
Competitive intensity from new entrants (Birla Opus)
Analysts raised concerns about new competition with aggressive pricing. Management downplayed the threat, but the risk of market share loss remains.
RISK GONE
Slowdown in B2B business due to elections
Government project spending slowed in Q4 due to election code, and recovery may be delayed, impacting the B2B segment.
🤫 Topics management stopped discussing
Mentioned in Q1 FY24, Q2 FY24, Q3 FY24
Kitchen business was flat, bath business declined 5% YoY. Despite being small, these segments have not grown as expected and remain unprofitable.
Mentioned in Q1 FY24, Q2 FY24, Q3 FY24
Company reiterated its PBDIT margin guidance of 18-20%, with plans to deploy higher marketing spends.
Mentioned in Q3 FY24, Q4 FY24
Management noted that crude and monomer prices are volatile, and any geopolitical disruption could lead to input cost inflation, pressuring margins.
Mentioned in Q1 FY24, Q3 FY24
Nepal continues to be a worry with no turnaround expected in Q4; Egypt faces forex availability issues and currency depreciation.
Mentioned in Q1 FY24, Q3 FY24
Home décor business currently at 4% of decorative revenue; target is to reach 8-10% over time.
Fast read
Guidance and risk preview
Management expects volume growth to return to double digits in Q2, driven by festive season and rural recovery.
Input costs rose 1.8% in Q1 and are expected to rise another 1.5% in Q2, pressuring gross margins if price hikes are not fully passed through.
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