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.