Asian Paints’ net up 54% despite flat revenue growth
- Despite the company’s continuing efforts to strengthen its décor business with new collections, and network, and store expansions, demand was soft due to muted consumer sentiment
New Delhi: India’s largest paints company Asian Paints Ltd reported a consolidated net profit of ₹1,205.4 crore for the September quarter, up 54% from ₹782.7 crore a year ago, despite flat revenue growth.
Its revenue rose a mere 0.3% to ₹8,478.57 crore during the quarter under review, primarily due to sluggish demand, a delayed festive season as well as erratic monsoon rains.
“Erratic monsoon impacted market sentiment potentially leading to deferment of sale to October given the late Diwali this year. Growth in automotive and refinish business was decent. In contrast, our general industrial coatings business sustained its double-digit growth trajectory,” said Amit Syngle, managing director and chief executive, Asian Paints. “Operational, formulation and sourcing efficiencies coupled with moderating raw material prices benefitted our margins in Q2 resulted in strong profit growth.”
The paint manufacturer’s material costs for Q2 fell from ₹4,925 crore a year ago to ₹3,918.27 crore. The company’s earnings before interest, taxes, depreciation and amortization stood at ₹1,716.2 crore, while its operating margin was at 20.3%. Net cash at the end of Q2 was at ₹3,542.8 crore.
During the quarter, the firm witnessed 6% volume growth in the decorative paint business. It also reported sustained revenue growth in industrial business. Revenue fell 3.9% in its international business to ₹775 crore due to certain macroeconomic challenges. “Our International business, though supported by robust growth in the Middle East, and improved profitability, remained constrained by macro-economic challenges, inflation, and forex unavailability in geographies of South Asia and Egypt.” Revenue for its home décor business was also suppressed during the second quarter of FY24. Revenues from its bath fittings and kitchen verticals of the home décor business declined to ₹81.4 crore and ₹96.8 crore, respectively.
White teak vertical saw an 8.5% increase in revenue to ₹26.1 crores, while weatherseal revenue doubled to ₹12.6 crore.
Despite the company’s continuing efforts to strengthen its décor business with new collections, and network, and store expansions, demand was soft due to muted consumer sentiment. “We expected the results to remain muted in the current quarter, but Q3 and Q4, should be reasonably good, given strong undercurrent in function,” said Deven Choksey, managing director of DRChoksey Finserv Pvt. Ltd.
“So, one should be seeing higher business traction, particularly in the decorative segment, given the festive season has already started. The festive season this year will be better than the previous year.”
Nuvama Wealth and Investment Limited also expects double-digit sales and volume growth for Asian Paints, in the quarter ending December 2023.
The paint industry has time and again been provided a prime opportunity to cater to the increased paint demand for home improvement and decorations, during festive seasons like Diwali. “Looking towards the second half of the year, we remain optimistic about improved demand conditions well supported by the longer festive season and the overall buoyant domestic economic growth,” Syngle added.
The estimated value of the decorative paints industry in India is at ₹70,000 crore. The paints industry is witnessing double-digit growth every year, driven by increasing consumer aspirations and the government’s push for ‘Housing for All’.
Now, with the entry of Grasim, Pidilite, and JSW, India’s paints sector is set to witness increasing competition as established players like Asian Paints, Berger Paints, Kansai Nerolac, and Akzo Nobel dominate three-fourths of the market. “I believe companies that have deep niches as Asian Paints will have better growth, others might see relatively a muted growth or even slower growth. This business is more of a distribution business than anything else, given Asian Paints have deeper reach going ahead they will be better than others for sure,” Choksey added.
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