Asian Paints Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from Asian Paints Limited (ASIANPAINT) Q2 FY23 Earnings Concall

Management Update:

• [00:05:07] ASIANPAINT said that it was able to grow much better in the T3, T4 centers in 2Q23, indicating the rural demand being much better for the company vs. the T1 and T2 centers.

• [00:06:10] ASIANPAINT stated it saw some down trading in terms of the luxury, premium and some of the economy products due to the steep price hikes undertaken in the last 6 months on these products.

Q&A Highlights:

• [00:37:43] Abneesh Roy of Nuvama Wealth asked about backward integration, if ASIANPAINT will get aggressive in adhesives since VAM is a raw material for VAE. Amit Syngle MD answered that the VAM, VAE technology would be helpful for ASIANPAINT in the entire area of adhesives.

• [00:41:50] Abneesh Roy from Nuvama Wealth enquired about the white cement opportunity. Amit Syngle MD said that overall it’s a 7-8 lakh tons kind of market in India and is growing at 15-20% overall, which makes it a big opportunity in terms of selling in retail packs.

• [00:42:57] Abneesh Roy with Nuvama Wealth asked if in H2, the pricing and volume growth of double digit is tough. Amit Syngle MD replied that the company doesn’t think so. It’s a function of how the overall product mix augurs. Going forward, ASIANPAINT is seeing volume and value growth to be healthy.

• [00:47:58] Avi Mehta of Macquarie asked if the company’s margins are going to move to around 39.5-40.5% by 4Q23, considering softness in painting demand. Amit Syngle MD answered that there is no risk in reaching that level. Also the softness in demand is just incidental and there is no reason to believe that it won’t jump back.

• [00:50:17] Shirish Pardeshi from Centrum Broking asked about the timelines of Riddhi Siddhi JV and their rights on reserves. Amit Syngle MD answered that the limestone reserves are in Fujairah and Riddhi Siddhi has rights for a very long time of over 50-100 years. ASIANPAINT is also putting a clinker manufacturing unit in Fujairah that would come up in about 24 months.

• [00:51:59] Shirish Pardeshi of Centrum Broking also asked about capacity expansion, which are the locations finalized and if it’s related to decorative emulsions or something else. Amit Syngle MD said the overall expansion is for decorative since it’s growing strong. ASIANPAINT added it’s also looking at some brownfield projects.

• [00:53:13] Shirish Pardeshi with Centrum Broking asked about any expected price correction on falling RM prices. Amit Syngle MD replied that ASIANPAINT is not getting immediately into looking at any price decrease due to RM price decrease. The company would like to let things stabilize and then take a concerted call.

• [00:55:03] Percy Panthaki from IIFL Securities asked about the price rise taken between March 31, 2022 to now. Amit Syngle MD said that the company has taken a price hike of about 3% in the period over a total inflation of about 8%.

• [01:00:57] Jay Doshi of Kotak Securities asked about the 500-700 bp GM advantage in putty due to white cement backward integration, what improvement will it see in emulsions portfolio.  Amit Syngle MD said that overall, the advantages will be much higher in terms of VAM VAE coming. So the margins could be far higher.

• [01:02:06] Jay Doshi of Kotak Securities enquired how the 1.5 lakh tonnes capacity of backward integration compare vs. overall decorative paints capacity of 22.7 lakh tonnes. Amit Syngle MD replied that it bolsters ASIANPAINT’s overall water-based emulsions daily capacity till about 2027. So it would give the company an advantage till about 2027, 2028, post that will have to go for expansion.