Summary of earnings call for Asian Paints Ltd published on 02 Aug, 2025

Asian Paints Limited
Q1 FY26
Call date · July 29, 2025

1 · Management Commentary

Key Positives

• Sequential uptick in demand, with both T1/T2 and T3/T4 cities showing similar demand conditions.
• Industrial business continued strong performance, growing ~8.8% and supporting overall coatings growth.
• Decorative business in India saw 3.9% volume growth YoY; overall coatings volume growth at 4.2%.
• New products contributed 14% to overall revenues.
• Backward integration projects (VAM VAE emulsion plant at Dahej and white cement plant in Dubai) are on track.
• International business grew 8.4% in INR terms (17.5% in constant currency), with strong performance in Asia, UAE, and Egypt.
• Gross margins remained healthy at 43.2% (standalone), 42.6% (consolidated).

Key Negatives

• Value growth declined by 1.2% YoY; revenue at base levels.
• Early monsoons dampened demand, especially in June, impacting coatings and B2B/institutional business.
• Luxury emulsions underperformed due to downtrading; CHS (cooperative housing) and home décor businesses remained slow.
• White Teak business struggled; discretionary spends remained under pressure.
• PBT margins in industrial businesses slightly depressed due to competitive pressures.

Forward Guidance

• Capex commitment of ~₹700 crore for FY26; ₹100 crore already spent. White cement plant near commissioning; VAM VAE plant to contribute from Q1/Q2 FY27.
• Continued focus on innovation and new product launches, including premium and super luxury segments (e.g., Nilaya Arc).
• Expansion of retail footprint (now at 1.7 lakh outlets) and Beautiful Home stores (72 stores).
• B2B and industrial segments expected to be key growth drivers, leveraging government and infrastructure projects.
• Monitoring impact of anti-dumping duty on TiO₂; pricing decisions to be reviewed based on raw material trends.
• Guidance for PBDIT margins maintained at 18–20%; single-digit growth expected in near term.

2 · Q&A Highlights

Q 1 (Composite): How is demand shaping up given macro headwinds (e.g., IT job cuts), and what is the impact of new competition, especially in premium/mid segments?
A (Management):
• Repainting demand is resilient as it is need-based; new construction may see some impact but not significant yet.
• Competitive intensity remains high; focus is on innovation, regionalization, and brand saliency.
• 10% extra grammage by competitors seen as a discount, benefiting intermediaries more than consumers.

Q 2 (Composite): What is the impact of higher rebates and sales/marketing expenses on margins and sales?
A (Management):
• Increased sales and marketing spend is strategic and region/segment-specific, aimed at sustainable growth rather than short-term gains.

Q 3 (Composite): Why has luxury segment demand been weak, and is downtrading a concern?
A (Management):
• Luxury segment is small; downtrading observed due to liquidity constraints, but premium segment performed better.
• Expectation is that luxury demand may revive closer to the festive season.

Q 4 (Composite): What is the outlook for demand in coming quarters, especially with early festive season and monsoon impact?
A (Management):
• July demand trends similar to Q1; Q3 may see fewer retail days due to early Diwali, but September could be strong unless rains disrupt.
• Double-digit volume growth unlikely in near term; single-digit growth expected.

Q 5 (Composite): How will anti-dumping duty on TiO₂ and raw material trends affect margins and pricing?
A (Management):
• TiO₂ duty will impact costs by 1.5–2.5% of raw material index; some offset from raw material deflation.
• Pricing actions will depend on how these factors balance out; closely monitoring for next month.

Q 6 (Composite): Capex plans and timeline for backward integration benefits?
A (Management):
• FY26 capex at ₹700 crore; white cement plant to start contributing soon, VAM VAE plant benefits expected from Q1/Q2 FY27.

Q 7 (Composite): Margin guidance and growth outlook amid competitive pressures?
A (Management):
• PBDIT margin guidance of 18–20% maintained, supported by cost excellence, innovation, and B2B/industrial growth.
• Volume-value gap has narrowed and is expected to be maintained.

Q 8 (Composite): Will B2B/industrial segments outpace decorative in the medium term?
A (Management):
• Industrial and B2B expected to be strong growth drivers, given ongoing industrialization and government infrastructure investments.

3 · Other Key Numbers

• Decorative business India volume growth: 3.9% YoY (Q1 FY26); value growth: -1.2% YoY.
• Overall coatings volume growth: 4.2%; industrial business growth: ~8.8%.
• New products contributed 14% to revenues.
• Retail footprint: ~1.7 lakh outlets.
• Beautiful Home stores: 72.
• International business growth: 8.4% (INR), 17.5% (constant currency).
• Industrial (PPGAP) business growth: 11%; A PPPG business growth: 5%.
• Standalone gross margin: 43.2%; PBDIT margin: 19.4%.
• Consolidated gross margin: 42.6%; PBDIT margin: 18.2%.
• Raw material deflation: ~1% in Q1 FY26.
• Capex committed for FY26: ₹700 crore; spent so far: ₹100 crore.
• Impact of TiO₂ anti-dumping duty: 1.5–2.5% increase in raw material cost index.
• No business segmental split disclosed for core decor vs. waterproofing/putty.
• Volume-value gap in decorative narrowed; expected to be maintained.
• No change to 18–20% PBDIT margin guidance.

Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.