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Centrum Broking Report
Asian Paints Ltd.'s Q4 FY23 print was mixed; though 16% volume growth YoY was ahead of our estimates, consolidated revenue/Ebitda/profit after tax grew 11.3%/29.2%/29.6%. Asian Paints reported three-year compound annual growth rate value/volume at 25.6%/22.8% in Q4.
Given strong painting season, revenues were influenced by,
higher growth in tier-I/tier-II versus rural markets,
premium and luxury range,
waterproofing range,
strong project/institutional business, and
distribution reach (1.5 lakh).
International business grew 10% constant currency, yet industrial joint ventures PPG-Asian Paints/ AP-PPG grew 8%/17% driven by price realisations.
Gross margin zoomed to 42.4% (up 379bp) settling Ebitda margins at 21.2% (up 293 bp) despite higher employee cost/other expenses by 14.1%/16.7% and ad-spends (3.5% of sales).
With Rs 20 billion capex, Asian Paints planned to add capacity of 2.5 lakh kilo litres in FY24. Management retains double digit volume growth aspiration (1.5 times gross domestic product growth) and balancing Ebitda margins ~18-20% band, yet said to pass on benefits arising from lowering inflation.
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