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    Asian Paints

    ASIANPAINTMixed
    Consumer Durables·4 Feb 2025
    Management Summary

    Asian Paints' Q3 FY25 saw continued demand weakness in decorative paints with a shorter festive season and sustained urban slowdown. Volume growth was a modest 1.6% while value declined 7.8%. Gross margins improved sequentially from Q2 (+210bps) but were 100bps lower YoY. Management maintained the 18-20% EBITDA margin guidance and signaled stress would continue for at least 2 more quarters. B2B business emerged as a bright spot with government spending revival, while the industrial segment continued outperforming.

    Highlights

    8

    • Q3 volume growth of 1.6% with value degrowth of -7.8%; 9M volume +2.8%, value -5.8%

    • Standalone gross margin at 43.2% in Q3 (vs 44.2% YoY); PBDIT margin at 20.7% (-40bps YoY)

    • Consolidated PBDIT margin at 19.2% in Q3; 9M at 17.9% (-415bps YoY)

    • Weak festive demand with shorter Diwali impacting October; urban stress continued

    • Industrial segment (auto, protective, powder) outperformed decorative

    • B2B/projects business picked up in Q3 with government spending revival; contributes 16-17%

    • PPGAP auto JV achieved all-time high PBT margin of 22.1% in Q3

    • Average price decrease of 0.3% taken in end-Jan 2025 on select products

    Concerns

    2

    • Sustained urban demand weakness with no clear recovery timeline

    • Competitive intensity dynamic and unpredictable with new entrants

    What Changed2

    vs Q4 FY25

    Guidance items4 → 3 (-1)Risks discussed6 → 4 (-2)
    Key financials

    Metrics

    10

    Periods

    3

    Headline

    4
    • PPGAP Q3 PBT Margin
      22.1%
    • PPGAP 9M Revenue Growth
      7%
    • B2B Business Share
      16.5%
    • New Products Revenue Contribution
      12%

    Q3

    5
    • Volume Growth
      1.6%
    • Value Growth
      -7.8%
    • Standalone Gross Margin
      43.2%
    • Standalone PBDIT Margin
      20.7%
    • Consolidated PBDIT Margin
      19.2%

    9M

    1
    • Standalone PBDIT Margin
      19.2%

    Segment breakdown

    Decorative India
    1.6% Q3 Volume Growth-7.8% Q3 Value Growth
    PPGAP (Auto/Refinishes)
    6% Q3 Revenue Growth22.1% Q3 PBT Margin
    APPPG (Industrial)
    0 flat Q3 Revenue Growth8.4% Q3 PBT Margin
    AP Global
    17.1% Q3 Growth (constant currency)5% Q3 Growth (INR)
    List

    Guidance & targets

    3
    CategoryTargetPriority
    Profitability
    PBDIT Margin Guidance
    18-20%
    		High
    Revenue
    Volume Growth Target
    Single digit volume growth going forward
    		Medium
    B2B Business
    Growth Target
    Double-digit growth
    		Medium

    Risks & concerns

    6
    RiskSeverity

    Sustained urban demand weakness with no clear recovery timeline

    Urban centers continued to show slow growth; management guided for at least 2 more quarters of stress; compared to worst conditions since 1997 — Management acknowledged

    high

    Competitive intensity dynamic and unpredictable with new entrants

    Trade schemes and discounting remain dynamic region by region; no stability reached; some players not worried about bottom line — Both acknowledged

    high

    Down-trading from premium to economy products continuing

    Volume-value gap widening; consumers postponing repainting and down-trading when forced to paint due to liquidity constraints — Management acknowledged

    medium

    Rupee depreciation could offset raw material deflation benefits

    Weakening rupee flagged as key concern; could erode gross margin benefits from crude deflation — Management acknowledged

    medium

    Areas of Evasion(2)

    • Specific market share data
    • Competitive response details

    Q&A highlights

    3

    “it would take at least two quarters in terms of at least where we see that possibly some of this area will be there”

    Management guiding for at least 2 more quarters of demand stress before recovery, setting expectations for H1 FY26 weakness

    asked by Avi Mehta (Macquarie)

    1 min read4 chapters

    Detailed Narrative

    01

    Weakest Festive Season in Decades

    Q3 FY25 was impacted by a shorter Diwali, with October particularly weak. Urban demand remained sluggish while seasonal markets underperformed. Volume growth of 1.6% was accompanied by -7.8% value decline, with the volume-value gap reflecting both down-trading and pricing pressures. The decorative industry overall was estimated at minus 4-5% in value terms.

    02

    Industrial Segment Outperforms with Record Auto Margins

    The PPGAP auto/refinishes JV achieved an all-time high PBT margin of 22.1% in Q3 with 6% revenue growth. The industrial segment broadly outperformed decorative paints. APPPG (powder/protective) was flat for the first time after 3 years of strong growth, with PBT margin declining to 8.4% from 11.5% YoY due to tight pricing.

    03

    B2B Business Emerges as Key Growth Driver

    The projects/institutional business picked up meaningfully in Q3 with government spending revival post-elections. Currently contributing 16-17% of revenue, management targets double-digit growth here. Key segments include factories, government infrastructure, and hospitality. Strategy focuses on technical specifications and value proposition rather than just pricing.

    04

    Innovation and Premiumization Continue Despite Market Weakness

    New products contributed 12% of Q3 revenue with focus on premium/luxury launches including Nilaya Wall WRAP (do house in 3 days), Ultima Protek with graphene (12-year warranty), and Smartcare Infinia (25-year waterproofing warranty). Regional packaging initiative driving higher traction in local markets. Neo Latex targeting bottom-of-pyramid with 5 lakh KL potential category, currently at 7-9% penetration.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.