Asian Paints Q1 Preview: Growth May Be Impacted By Price Cuts, Weaker Product Mix

India's leading paint manufacturer, Asian Paints Ltd., is expected to report a muted performance while announcing its first quarter results for FY25.

According to Bloomberg estimates, Asian Paints' revenue in the quarter-ended June is projected at Rs 9,312 crore as compared to Rs 9,154 crore over the same period last year.

Ebitda is estimated to be Rs 1,970 crore, with Ebitda margin at 23.3%, while net profit is expected to be Rs 1,412 crore.

According to brokerages, its growth may be impacted by a weaker product mix and price cuts. With the entry of Birla Opus Paints, there may be heightened price wars and higher brand spending, exerting pressure on margins in the coming quarters, they said.

• Revenue may rise 1.7% to Rs 9,312 crore.

• Ebitda may fall 7% to Rs 1,970 crore.

• Ebitda margin may contract to 21.1% versus 23%.

• Net profit may fall 9% to Rs 1,412 crore.

• Overall demand was muted due to severe heatwaves and the impact of elections, with painters being less available as they participated in election activities.

• Consolidated revenue and Ebitda are expected to decrease by 1% and 12.2% YoY, respectively, due to a higher base and a lack of operating leverage.

• Volume growth is projected at 9% YoY, but sales may slightly decline due to earlier price cuts and an adverse mix.

• Gross margin is anticipated to expand by 107 basis points YoY to 44%, whereas Ebitda margin is expected to decline by 260 basis points YoY to 20.5%.

• The impact of Birla Opus on sales and volume is hardly experienced by Asian Paints.

• Steady demand is expected, with high single-digit to double-digit volume growth.

• A small expansion in gross margin is anticipated, driven by favourable input prices, especially with softer crude oil and its derivatives.

• The low input price-driven margin expansion tailwind is considered to be behind for paint companies.

• Increased competition from new entrant Birla Opus Paints may lead to heightened price wars and higher brand spending, exerting pressure on margin in the coming quarters.

• Axis Securities expects Asian Paints to see volume growth of around 6% in Q1 FY25.

• Value growth is likely to be impacted by a weaker product mix and price cuts.

• Ebitda is projected to decline due to negative operating leverage, increased advertising expenditure, and a high base effect from a one-off reversal of sick leave provision in the previous year's first quarter.

• Key monitorables include demand trends in metro and tier 2/3 towns, raw material outlook, margin outlook, pricing actions, and competitive intensity.