JSW Dulux Q1 FY27 earnings call

JSW Dulux Limited reported a robust Q1 FY27, with like-to-like revenue growing 18.8% to ₹965 crores, up from ₹812 crores in the prior year. The company achieved an impressive overall volume growth of 25%, which translates to 18-19% when adjusted for price. PAT saw a significant increase to ₹135.5 crores from ₹67.2 crores, benefiting from one-off^📎 items including ₹21.5 crores interest on IT fund and ₹55.9 crores dividend income from ICI R&T. EBITDA grew 14.7% to ₹115.1 crores, with a reported margin of 11.9%.

The strong growth was primarily driven by the premium segment within the decorative business, which contributed 45% and grew at high double-digit rates. The industrial business also performed exceptionally well, growing upwards of 25%. Growth was largely attributed to increased value per outlet from existing towns and a secular trend across various outlet types, rather than new town expansion. Adjacency categories also grew faster, while the mid-market segment showed slower progress.

The reported gross margin stood at 37.4%, impacted by two main factors. Firstly, the company had to purchase high-priced inventory at the end of March, which affected margins by approximately 2 points. Secondly, a reclassification of painter promotional spends to gross revenue, in line with industry practices, impacted margins by about 2.5 points. The underlying gross margin was estimated to be closer to 39.5-40%. The EBITDA margin of 11.9% reflects strategic reinvestment in growth, including the hiring of approximately 160 new personnel across R&D and sales, which increased salary and travel costs.

The company is implementing a micro-market strategy, focusing on high-share states and expanding active presence from 3,400-3,500 towns to 4,500 this year, targeting towns with populations over 20,000. Key focus areas include premium products, adjacencies (Waterproofing and Woodcare), and the mid-market. Digital tools and AI are being leveraged for analytics and sharpshooting in sales efforts. In top 20 towns, the company plans to shift to a direct/hybrid distribution model, while continuing with the distributor model elsewhere.

The integration with JSW Paints, under 'Project Akshaya', is progressing with initial savings of ₹2.4 crores realized in Q1. This project aims to reduce duplication, achieve cost efficiencies, and unlock synergies across manufacturing (e.g., cross-manufacturing products), supply chain, and ERP systems. The ERP migration is planned for completion by year-end, and functional structures are being integrated to create a unified business model that enhances customer value and product offerings. This initiative is crucial for funding growth and achieving the vision of becoming a number two player overall and number one in industrial coatings.

Management acknowledges the decorative business remains highly competitive, with new entrants continuing to pursue discounting strategies. JSW Dulux's strategy is to focus on brand building and continuous sell-out rather than matching competitor discounts. Despite the short season in July due to rainfall, the company expects the current quarter to maintain a 'similar band' of performance, reiterating its commitment to achieving double-digit volume growth. The long-term vision is to achieve a 13-15% EBITDA margin and become a number one player in the industrial segment by 2030-2031.