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Nirmal Bang Report
Asian Paints Ltd.'s Q1 FY25 results were weaker than expected on all fronts, the second consecutive quarter of all round disappointment. Volume growth was at 7% (below the management's expectations of double digits) because of disruptions due to elections and heat waves along with steeper realisation decline than expected.
Weak mix, unanticipated material cost pressures and sharp increase in staff costs led by increasing headcount, meant earnings missed expectations significantly. The management called out the likelihood of double digit volume increase ahead with less steep realization decline.
Price increases starting in the current month will help realization and margin performance ahead.
While our Ebitda margin projections for FY25E and FY26E are still higher than the management's erstwhile guidance of 18-20%, earnings outlook is significantly weaker, especially with the overhang of rising competition.
We maintain “Accumulate” rating on the stock, owing to the weak outlook and expensive multiples inhibiting share price appreciation.
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