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Akshay Rajawat    


Surat, India

I am CA student and along side perusing the CFA (U.S.). I have a 6 month experience in Equity Research where i have done my internship programme in the same. I am keen to write an articles on Equity.

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Contributor since: 2022

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ASIAN PAINTS

Comments: 0 | Likes: 0 | Current Price: ₹ 2844.4


Asian Paints Ltd

A Q3FY23 Earnings Analysis


About Asian Paints

Asian Paints is India’s leading paint and decor company and ranked among the top ten Decorative coatings companies in the world with a consolidated turnover of ₹ 29,101.28 crores (₹ 291 billion) with a market capital of approx. ₹ 3100 billion. Asian Paints along with its subsidiaries have operations in 15 countries across the world with 27 paint manufacturing facilities, servicing consumers in over 60+ countries through Asian Paints, Apco Coatings, Asian Paints Berger, Asian Paints Causeway, SCIB Paints, Taubmans and Kadisco Asian Paints. Asian Paints also offers a wide range of Home Décor products and is an emerging strong player in the Home Improvement and Décor space in India. 

Q3FY23 Result

Asian Paints Consolidated Results, Q3 FY’23:

  • Consolidated Sales increased by 1.7 % to ₹ 8,607.50 crores from ₹ 8,462.15 crores.
  • Profit before depreciation, interest, tax and other income (PBDIT) for the Group (before share of profit in associates) increased by 4.5 % to ₹ 1,611.43 crores from ₹ 1,542.31 crores.
  • Profit before exceptional items and tax increased by 6.1 % to ₹ 1,478.20 crores from ₹ 1,393.72
    crores.
  • Net profit after minority interest increased by 5.6 % to ₹ 1,072.67 crores from ₹ 1,015.69 crores.

Asian Paints Consolidated Results, 9M FY’23:

  • Consolidated Sales increased by 21.8 % to ₹ 25,616.98 crores from ₹ 21,033.53 crores. PBDIT for the Group (before share of profit in associates) increased by 30.8 % to ₹ 4,395.08 crores from ₹ 3,360.32 crores.
  • Profit before exceptional items and tax increased by 33.5 % to ₹ 4,003.19 crores from ₹ 2,998.54 crores.
  • Net profit after minority interest increased by 31.7 % to ₹ 2,872.31 crores from ₹ 2,180.15 crores.

Segment Wise Performance

Decorative Business

Flat volume & value sales for the quarter despite multiple headwinds Strong Business Momentum evident from double digit 3-year compounded growth

Decorative Business (India) - Volume Growth Trend Throughout the Quarter 

Decorative Business Cont...

Extended monsoon & shorter Diwali season coupled with a high-volume base impacted overall growth in Q3’23, especially in North, Central & West markets
- Tepid growth across markets - T1/T2 as well as T3/T4 centers
- However, strong recovery recorded in December with double digit volume growth across markets

Mix led by Economy & Waterproofing range, with downtrading seen in certain Premium range products. Luxury Emulsions performed relatively better
- Last year Q3 product mix comparatively better with pre-stocking on price increases in Nov’21 & Dec’21

Strong foray in Project/Institutional business – gained inroads across segments
- Grew well in Government, Factories, CHS & Builder segments

Continued expansion of the distribution footprint with harmonious co-existence of Distributor + Direct Dealer model
- Added ~10000 new retail points in 9M; enhancing our Rurban distribution reach

Improving Customer experience with Safe Painting Service (SPS) & Trusted Contractor Service (TCS) – the largest of its kind painting service in the world, now available across 834 towns

Home Decor Business

Bath Fittings business: Sales decreased by 10.9% in Q3 FY’23 to ₹ 89.84 crores from ₹ 100.84 crores. PBDIT was ₹ 0.07 crores in Q3 FY’23 as against ₹ 2.47 crores in the corresponding period of previous year.

Sales increased by 25.7% in 9M FY’23 to ₹ 309.60 crores from ₹ 246.21 crores. PBDIT was ₹ 5.50 crores in 9M FY’23 as against ₹ 5.30 crores in the corresponding period of previous year.

Kitchen business: Sales decreased by 7.1% in Q3 FY’23 to ₹ 100.68 crores from ₹ 108.41 crores. PBDIT loss was ₹ 3.26 crores in Q3 FY’23 as against profit of ₹ 1.82 crores in the corresponding period of previous year.

Sales increased by 18.5% in 9M FY’23 to ₹ 327.55 crores from ₹ 276.35 crores. PBDIT loss was ₹ 8.18 crores in 9M FY’23 as against loss of ₹ 2.30 crores in the corresponding period of previous year.

Whiteteak (lighting) generated revenue of ₹ 28.46 crores in Q3 FY’23 and ₹ 72.71 crores in 9M FY’23. Weatherseal (uPVC windows and doors) generated revenue of ₹ 6.80 crores in Q3 FY’23 and ₹ 15.05 crores in 9M FY’23. 

Home decor current business highlights

Transitioning from ‘Share of Surface’ to ‘Share of Space’ within the Homes

  • Beautiful Home Stores – Home Décor under one roof
  • 38 stores functional now across metros, T1/T2 cities
  • Beautiful Homes Service – Personalized Interior Design to Professional Execution – offered in 11 cities
  • BeautifulHomes.com – inspiring millions to create their dream homes

Home decor's acquired business performance:

  • White Teak offering Decorative and Designer Lighting and Weatherseal offering uPVC Windows and Doors - gaining from the synergies
  • White Teak generated revenue of Rs 29 crs during Q3; 9M revenue of Rs 73 crs against full year revenue of Rs 58 crs last year
  • Weatherseal - Revenue of Rs 7 crs during Q3; Revenue of Rs 15 crs for Jun’22 to Dec’22 period against full year revenue of Rs 14 crs last year
    • Both businesses benefiting from the integration with the Beautiful Homes Stores network

Kitchen Business

Net Sales @ Rs 101 crs in Q3, de-growth of 7%
- Slower demand in retail channel
- Strong integration with BH Store & BH Service aiding growth in full kitchen business

Higher Loss compared to LY due to subdued sales

  • Loss of Rs. 6 crs in Q3 vs breakeven LY

Bath Business

Net Sales @ Rs 90 crs in Q3, de-growth of 11%
- Projects business continues to lead growth amid challenging situation in Retail
- Premium range ‘Bath Sense’ & Sanitary ware performing well
- Subdued sales and material inflation hurting profitability
- Loss of Rs 1 crs in Q3 (vs Rs 1.3 crs profit in LY)

International Business

Business conditions remained challenging in Asian markets while improvement seen in other geographies
- Focus on PreLux & Waterproofing categories playing out well
- Overall, International Business revenue: Q3 at Rs. 779 crs (+2%) & 9M at Rs 2,290 crs (+11%)
- Q3 growth largely led by price increases
- Significantly improved Profitability on the back of price increases undertaken to negate inflation and cost efficiency measures
- Q3 PBT Rs. 37 crs against Rs 11 crs in LY (9M PBT at Rs 118 crs vs loss of 17 crs LY)

Industrial Business

PPG-AP
- High double digit value growth led by demand recovery in Automotive segment
- Price realizations helped improve PBT margins for the quarter & 9 months to double digits

AP-PPG
- Continued to exhibit strong growth trajectory across business segments
- Price increases coupled with improved sales mix helping improvement in PBT margins

Gross Margin of the company and their trend

Financial Performance during Q3FY23 and 9MQ3FY23

Outlook

Demand conditions looking better – recent downturn in inflation as well as the strong recovery seen with double digit volume and value growth in Dec’22
- Good monsoon coupled with expected increases in MSP augurs well for Rural sector
- Material prices expected to further soften in Q4; Will further improve margins
- B2B projects business should continue its growth trajectory with support from demand in Housing, Construction, Auto and Industrial
- Need to be watchful of the recessionary fears on the global front
- Forex pressure persisting in many of the African as well as Asian markets

Disclosure:

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure:

Source - Company Presentation, Press Release and Analyst Conference Call. DIsc - This is not an recommendation as it is for knowledge purpose only.

Disclosure legality:

I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.

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