Asian Paints Q2 Results Review - Didn't Disappoint In Disappointing: ICICI Securities

ICICI Securities Report

While Asian Paints Ltd. reported weak Q2 FY25, some of the startling aspects were-

1. Volumes declined 0.5% in-spite of price cuts of ~4% and higher trade spends. We note volumes declined for the first time in past 12 years (Ex- Q1FY21 Covid impact),

2. Asian Paints has lost market shares to incumbents such as Akzo, Indigo and Berger. The loss of shares to new players is yet to play out materially.

3. Ebitda margin came in at 15.6% materially below the guided range of 18%- 20%. While it may recover in H2 FY25 on ~2.5% price hike in Q2, we believe losses in putty business may cap the margin recovery in medium term and

4. there is impairment in value of Weatherseal and White Teak with revision in business plans.

As most new businesses remain in investment mode, there are reasonable questions on value creation potential of these businesses. We cut FY25-26E earnings by ~10%. Reduce.

We reckon [comfortable] competitive equilibrium in paints is likely broken. Retain underweight on large cap paints. Contrarian investors may consider owning Akzo Nobel/Indigo Paints/Kansai Nerolac.

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