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ICICI Securities Report
Asian Paints has ~80% consumer mindshare, ~70% profit-pool share and ~60% value market share. ~1000bps gross margin decline (though for one quarter) is unprecedented.
While management commented about "steep input cost inflation", we reckon that keeping lower profit pools and competitor signalling are important decision-drivers for Asian Paints (which we agree).
We stay believers of the life-cycle value of the consumer concept, an important input for our DCF assumptions.
Asian Paints says it plans to maintain operating margin (our interpretation) in band of 18-20% via (1) selective price hikes, (2) formulation and sourcing efficiencies (Rs 3 billion savings).
We model higher price growth in FY22 and FY23 (vs. FY18-21).
Maintain ADD.
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