Asian Paints Q4 Preview: Battling Demand and Competition

Asian Paints, India's leading paint manufacturer, is expected to report subdued earnings for the quarter ending in March according to some analysts. This outlook is due to low volume sales, reflecting an ongoing slowdown in overall consumer spending.

In a regulatory filing on March 15, 2024, Asian Paints Ltd announced that a meeting of the company's Board of Directors is scheduled for May 9, 2024. The purpose of the meeting is to consider and approve the audited standalone financial results for the quarter and the financial year ending March 31, 2024.

The company announced that it will hold a conference with investors on Thursday, May 9, 2024 at 4.30 p.m. “During such conference, the management will brief the investors on the performance of the Company for the quarter and financial year ending 31st March 2024. Details of the investor conference will be published on the Company’s website (www.asianpaints.com) in due course,” added the company in the filing.

According to a Moneycontrol survey of seven brokerages, Asian Paints is anticipated to report a modest year-on-year revenue growth of 2.6% for the recent quarter, with the top line expected to reach ₹9,017 crore, up from ₹8,787 crore in the corresponding quarter of the previous year.

Asian Paints is projected to see a slight increase in its EBITDA margin by 10 basis points year-over-year to 21.3%, though it will experience a moderate decline of 130 basis points sequentially from 22.6% in the December quarter. The Profit After Tax (PAT) for the March quarter is expected to be around ₹1,313 crore, reflecting a 4.4% increase from ₹1,258 crore year-over-year. Despite implementing approximately 3% price cuts to stimulate demand, Asian Paints did not achieve a significant boost in sales, which is expected to impact revenue growth for the quarter negatively. 

Brokerages anticipate that volume growth for Asian Paints will moderate due to heightened competition and a general slowdown in consumer spending. “Despite implementing price cuts in 4Q, volume has not recovered. We believe that demand remained subdued throughout the quarter,” Motilal Oswal noted.

As raw material costs stabilize, Asian Paints is expected to experience an expansion in gross margins, aided by improvements in formulation efficiencies. However, this improvement may be somewhat offset by the recent price reductions across its product range. Despite the gross margin expansion, the EBITDA margin is anticipated to remain stable due to increased advertising expenditures and operational expenses.

Nuvama Institutional Equities noted that, following a reasonably strong third quarter boosted by festival and wedding demand, the overall demand trends in the decorative segment have been muted. Key factors to watch in the coming period include the demand outlook in Tier 2 and Tier 3 towns, the pricing strategies, developments in raw material costs, and the increasing competitive intensity within the industry.

Asian Paints experienced significant growth in the third quarter of FY24, with a 35% increase in consolidated net profit year-on-year, reaching ₹1,448 crore. The company's consolidated revenue from operations rose by 5.4% year-on-year to ₹9,103 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a nearly 28% increase, amounting to ₹2,056 crore. Additionally, the operating margin expanded by 393 basis points to 22.59%.

Asian Paints has also maintained a generous dividend policy for its investors. In 2023, the company issued dividends twice: ₹21.25 in June and ₹5.15 in November. Similarly, in 2022, dividends were paid twice, with amounts of ₹4.40 and ₹15.50, both in October.