Asian Paints Ltd., India’s largest paint company that manufactures a wide range of paints for decoration and industrial use, in its Q3 earnings call highlighted continued stress in urban markets while seeing stronger rural demand expected to accelerate in Q4FY25 and Q1FY26, maintaining an 18-20% EBITDA margin guidance despite competitive pressures. The company is navigating one of the most challenging demand environments in decades through initiatives like Neo Latex paints and cost optimization, while maintaining sales investments. Management is expanding its B2B segment, which is 16-17% of revenue, through government projects and hospitality, aiming for double-digit growth in this segment while targeting single-digit volume growth overall, though the company noted it’s too early to assess new competition’s impact on the INR80,000 crore market.
Asian Paints reported mixed Q3 performance with net profit falling 24% to INR1,128 crore and revenue declining 6% to INR8,549 crore, primarily due to weak urban and festive season demand. While the domestic decorative business saw modest volume growth of 1.6% and industrial coatings grew 3.8%, segments like White Teak and Weatherseal experienced significant declines. The company’s international operations were a bright spot, growing 17.1% in constant currency terms, particularly in the Middle East. Despite EBITDA margins contracting from 22.6% to 19.5% due to product mix changes and higher expenses, the company remains optimistic about future growth. The company is optimistic about future growth, anticipating a recovery in rural demand and continued strength in its B2B segment, which includes government projects and hospitality. Asian Paints aims for single-digit volume growth overall, with a focus on improving product mix and driving value growth in key segments.
Continue Reading: Discover the Vital Insights from Asian Paints Ltd.’s Earnings Call!
Financial/Operational Metrics:
- Revenue: INR8,549 crore, down 6% YoY.
- Net Profit: INR1,128 crore, down 24% YoY.
- Basic EPS: INR11.58, down 23% YoY.
- Operating Profit: INR1,637 crores, down 20% YoY.
Outlook:
- Business Segments: Industrial and B2B businesses expected to remain strong.
- Rural Market: Rural demand may improve due to monsoons and government spending.
- Economic Factors: Raw material prices softening, but rupee weakness remains a concern.
Analyst Crossfire:
- Near-Term Recovery & Sales Growth Outlook, EBITDA Margin Guidance (Avi Mehta – Macquarie): Urban demand remains weak, but rural demand and B2B business are expected to drive recovery. A return to positive YoY sales growth may take at least two quarters. Despite new competition, the company remains committed to its 18-20% PBDIT margin guidance, focusing on maintaining pricing discipline and leveraging strong segments (Amit Syngle – CEO).
- Geographical Demand and Market Share Trends (Tejas Shah – Avendus Spark): Northern and central India underperformed in Q3 due to weak festive demand, while non-seasonal markets saw better traction in November and December. The decorative industry declined ~4-5% YoY, but industrial paints remained strong. Some market share fluctuations occurred, but nothing significant for Asian Paints (Amit Syngle – CEO).
- Historical Demand Slowdowns & Response, Cost Control & Operational Efficiency (Manoj Menon – Analyst, Aditya Bhartia – Investec): The last comparable slowdown was in 1997. To counter weak demand, Asian Paints introduced Neo Latex Paints (low-cost segment), launched new wood finishes, and is pioneering mechanized painting techniques to increase painting frequency. Despite rising competition, employee and OPEX costs remained stable due to increased workforce productivity and internal optimizations. Discretionary spending should be viewed over a nine-month horizon rather than a single quarter (Amit Syngle – CEO).
- Rural vs. Urban Demand & Cautious Pricing Outlook (Mihir Shah – Nomura, Amit Sachdeva – UBS): Urban demand remains muted, while rural demand is performing relatively better. Strong monsoons should further support rural growth in Q4 FY25 and Q1 FY26. Pricing remains cautious due to weak consumer demand across industries. The company prioritizes triggering demand through innovation and brand-building over aggressive pricing strategies (Amit Syngle – CEO).
- Revenue Growth Expectations, B2B Business Growth & Outlook (Jaykumar Doshi – Kotak, Sheela Rathi – Morgan Stanley): The company aims for single-digit volume growth in upcoming quarters, with a focus on improving product mix to drive value growth. Strong growth expected in factories, government projects, and hospitality segments. B2B contributes ~16-17% of revenue and is targeted for double-digit growth (Amit Syngle – CEO).
- B2B Competitive Landscape (Sheela Rathi – Morgan Stanley): The segment is divided between pricing/credit-based (builder-focused) business and technology-led, specification-driven sales. Asian Paints aims to differentiate through technical expertise and value-added solutions (Amit Syngle – CEO).
