Categories Concall Highlights, Earnings, Industrials

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.

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