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Asian paints: CMP: 2946: Long Term Gr: 16% | CYear: (-2%) | Q1_FY_25 Result Update
(Muted volume growth continued from last year affected Revenue growth largely)
**Company Overview:**
Asian Paints is India's leading paint and decor company, ranked among the top 8 coatings companies globally. The company, with a consolidated turnover of ₹35,382 crores, has a strong market presence across 15 countries and operates 27 paint manufacturing facilities, serving consumers in over 60 countries. The company offers a wide range of home decor products and is the leading player in the Integrated Decor space in India. This company was started in a garage in Mumbai by 4 Friends in 1945 before Independence. During World War-2 & during the Quit India Movement of 1942, a temporary ban on paint imports left only foreign companies & Shalimar Paints in the market. Asian Paints took up the market back after Independence and today is History. It Became the Leading Paint manufacturer till 1967.
### *Industry Overview*:
The paint industry faced challenging demand conditions in Q1 FY25, impacted by severe heat waves and the general elections in India. Despite these challenges, the industry is expected to see improving demand conditions with the progression of monsoon and the upcoming festive season.
### Peer Group Analysis
Asian Paints' key competitors include Berger Paints, Kansai Nerolac, Indigo Paints and Akzo Nobel India. Asian Paints maintains a leading position around 40% in the listed market, driven by its extensive product range, strong distribution network, and continuous innovation.
### *Historical Performance*:
It took 68 years to reach 10000 Cr turnover while another 10000 Cr sales were accomplished just during the next 5 years.
FY_04: 1800 Cr | Profits: 200 Cr | Price: 30
FY_14: 10000 Cr (5X) | Profits: 1200 Cr (6X) | Price: 600 (20X)
FY_24: 35000 Cr (4X) | Profits: 5600 Cr (5X) | Price: 2900 (5X)
20 YEAR Sales Growth: 16% & 20X | Profit growth: 20% & 30X Price growth: 100X & If Invested 20 Years back today annual dividend would be almost equal to invested value.
Over the past five years, Asian Paints has shown resilient double-digit volume growth in its decorative business, with a 5-year compounded growth rate (CGR) of 16.5% in volume and 14.1% in value. The company's focus on innovation and customer-centricity has helped maintain its market leadership. Yet, the last 2 years post inflation period were highly challenging.
### *Current trend: Last year*
Sharp Price hikes were done during inflation time to save the profits, last year as inflation cooled off, price’s were lowered. Hence despite 9% volume growth last year we saw just 3% sales growth due to lowering prices of paints. The low sales growth continued for the full year & was seen till last Quarter Q4_fy_24.
### *Latest Financial Results (Q1 FY25)*:
**Consolidated Financial Results:**
- Net Sales: ₹8,943.2 crores (down 2.3% YoY)
- PBDIT: ₹1,693.8 crores (down 20.2% YoY)
- PBDIT Margin: 18.9% (down from 23.2%)
- Profit Before Tax: ₹1,603.6 crores (down 23.8% YoY)
- Net Profit: ₹1,170 crores (down 24.5% YoY)
**Volume and Segment Growth:**
- Decorative Business (India): Volume growth of 7%, with revenue decline of 3%
- Industrial Business: Grew by 5.8% in value, driven by Auto OEM and powder coatings
- International Business: Sales decreased by 2.3%, with constant currency sales increasing by 1.8%
- Home Décor Business: Bath Fittings sales increased by 10.3%, Kitchen business sales grew by 4.6%, White Teak and Weatherseal also showed strong growth.
**Regional Performance:**
- Ethiopia and Sri Lanka showed strong growth due to economic recovery.
- Nepal, Bangladesh, and Egypt faced challenges due to macroeconomic issues.
### *Highlights of the Results*:
- Subdued demand due to general elections and heatwaves.
- Price cuts in previous quarters and shifts in product mix impacted revenue.
- Strong growth in the Home Décor segment with new product synergies.
- Expanded distribution network, catering to over 1.65 lakh retail touchpoints.
- Continued innovation with new products contributing 12% of Q1 revenues.
### Future Outlook
Asian Paints expects improving demand conditions with positive rural sentiment and favourable monsoon progression. The company aims to drive growth through enhanced brand salience, innovation, and customer-centricity. Challenges remain in key geographies like Nepal, Bangladesh, and Egypt due to macroeconomic issues, but overall, the outlook remains positive with expected growth momentum post-elections and during the festive season. We may see this year somewhat better than last year with the sales growth of 5% but profits may decline by 12% as margins are under pressure.
As we have been recommending this company for a long time and for all those who have been accumulating during all corrections can even add more during recent corrections. New buying again can be done in this correction near 2600 & can book some 5% profits near 3400. Once demand (revenue) is back we may see a strong rally towards 4555 in 2 years. SIP should be continued in the current scenario.
### Investor Insights
For investors, Asian Paints remains a strong player in the paint and decor industry, with a robust track record of growth and innovation. Despite the short-term challenges, the company's long-term prospects are supported by its market leadership, extensive distribution network, and continuous focus on new product development and customer engagement. Overall we may see 15% long term growth which can help reach the benchmark turnover of 50000 Cr till fy_28 and 1 Lakh cr till fy_32. The wealth creator where multiyear rally along with consistent profits & growing dividends can be expected.
Promoters hold around 53% while FPI holds around 16% whereas MF & Insurance companies hold around 10%.
*Disclosure*: Before buying or selling should check data on their own, we are not the tip providers.
