Asian Paints Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from Asian Paints Limited (ASIANPAINT) Q1 FY23 Earnings Concall

Management Update:

• ASIANPAINT said its volume growth of 37% for 1Q23 was one of the highest volume growth in the last six quarters.

• ASIANPAINT also said it has been expanding at a staggering rate, adding more than about 5,000 retailing points in 1Q23.

• The company expects demand condition to be stable going ahead and seeing reasonable growth in rural and urban markets to continue.

Q&A Highlights:

• Abneesh Roy with Edelweiss asked if there is any seasonality in White Teak and the drivers for growth. Amit Syngle MD replied that the drivers are increase in company owned stores, introduction of White Teak in the Beautiful Home Stores and expansion of design and range in White Teak.

• Avi Mehta of Macquarie asked about the outlook on the input cost environment and if 1Q23 is the bottom of GM. Amit Syngle MD replied that looking at the overall environment, the volatility continues. The company believes it won’t be able to reach those levels until a point of time.

• Mihir Shah from Nomura enquired about GM and if ASIANPAINT expects its levels to go back to 43% odd or a new normalized margin band. Amit Syngle MD said that overall the entire index totally depends on the inflation going forward. Therefore, ASIANPAINT is calibrating its price increases accordingly. The company believes the GM range for some time might be in the band of about 38-40%.

• Mihir Shah from Nomura asked about the capex outlay planned for FY23 and FY24. Parag Rane GM Finance said that for the year, ASIANPAINT is putting a number close to about INR800 crores odd from a capital outlay point of view, most of it going into brownfield capital expansions.

• Richard Liu of JM Financial asked if the gross margin in 2Q will be lower than 1Q.  Amit Syngle MD replied that 2Q is still not over in terms of what is going on. ASIANPAINT is still monitoring the situation. The company added that, depending on the inflation, it might take more calibrated price increases going forward.

• Shrenik Bachhawat of JM Financial asked if there is any major change in the product mix in 1Q23 vs. last two, three quarters. Amit Syngle MD answered that overall the product mix was much better and the company had a good quantity of overall emulsions from economy, premium and luxury segment which sold better in terms of the mix.

• Shrenik Bachhawat of JM Financial enquired that for the next 5-10 years, what’s the volume CAGR target for the company. Amit Syngle MD replied that the company would like to pursue very healthy volume growth going forward. Therefore, ASIANPAINTS want to keep on looking at double digit volume growth rates.