Asian Paints Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Asian Paints Limited (ASIANPAINT) Q3 FY24 Earnings Concall

• Growth and Performance
  • Strong volume growth of 12% in decorative business and 5.5% in overall coatings in Q3.
  • 9% volume growth and 4.6% value growth in the first 9 months of FY2024.
  • Double digit compounded average growth rate of over 15% reflecting consistent and healthy growth.
  • Growth seen across both urban and rural markets in T1, T2 and T3, T4 cities.
  • Economy range products growth has surged but luxury products also growing in double digits.
• Financial Performance
  • Value growth of 4.1% in 9 months along with 23.5% PBDIT margin.
  • Over 500 basis points increase in margins versus last year.
  • Consolidated financials showed 5.4% value growth and 22.7% PBDIT margin.
  • One of the highest margins achieved in recent years.
• Distribution Network Expansion
  • Added 2,000 new touchpoints in Q3 taking overall retail footprint to 1.62 lakh retailers.
  • Consistent increase in distribution footprint over years.
  • Waterproofing brand seeing growth in both retail and B2B segments.
  • Projects and institutional business growing significantly faster than retail growth.
  • Committed INR 2000 crores in capital expenditure on expansion and backward integration.
  • To increase capacity by 2 lakh kl by end of year.
  • Painting services emerging as a star service and innovation area.
• Product Innovation
  • 280 new products in last 7 years contributing strongly to revenue.
  • Products like Flash target the unorganized segment and bring into organized fold.
  • 30-40% of portfolio has differentiated properties vs competition.
  • Anti-crack, textures, waterproofing, wallpapers etc. propositions differentiated.
• Home Decor Business Expansion
  • Currently 4% of decorative turnover, targeting 8-10% share.
  • Launched turnkey Beautiful Homes service in 11 cities.
  • Focus on new launches like wardrobes, bath products, lighting etc.
  • Lighting and UPVC windows/doors doubling and in expansion mode.
• Industrial Businesses Growth
  • Auto OE business grew 12% by value this quarter, 10% in 9 months.
  • Raw material impact on profits offset by price increases.
  • PBT up 40% in quarter, 50%+ in 9 months; margins at 22%.
  • General industrial business also grew 10% this quarter, 14% in 9 months.
  • Overall strong double digit growth in both industrial businesses.
• Business Outlook
  • Elections may cause some deferment of paint purchases.
  • Uptick in T3, T4 cities indicates potential for good growth.
  • Overall volume momentum expected to sustain.
  • South Asia and Nepal remain areas of concern.
  • Bangladesh should see higher growth after elections.
  • Sri Lanka has recovered somewhat but Nepal still a worry.
  • Egypt facing issues like forex availability and depreciation, but constant currency growth expected from most markets.
• Raw Material Prices and Margins
  • Softer raw material price trend expected to continue.
  • If deflation continues, will decide on retaining or reducing prices.
  • Select price cuts can spur demand in smaller towns.
• B2B Projects Business Growth
  • Strong growth in projects/B2B business over last 6-7 years.
  • Represented in 80% of marquee projects like airports, metros etc.
  • Overall marquee project margins lower than retail business.
  • Working on increasing margins as projects business grows.
• Value Growth Outlook
  • Premiumization efforts will continue to upgrade consumers.
  • Waterproofing, textures may improve upgrades partially.
  • VAM, VAE coming up in 1.5-2 years for backward integration.
  • Benefits to start reflecting with lag after projects commissioned.
• Home Decor Outlook
  • Currently at 4% of total decorative business.
  • Target is to reach 8-10% contribution by FY2026.
  • ROI model of 2.5-3 years for store investments by retailers.
  • 35-40 stores have achieved ROI showing profitable model.