Asian Paints Q4 Results Review - Focus On Volume Growth; Margin Risk Still Persists: Motilal Oswal

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Asian Paints Ltd. posted 1%/2% YoY decline in consolidated/standalone revenue in Q4 FY24, with decorative volume growth at 10% YoY (versus estimate 9%). The value-to-volume gap expanded to ~12% in Q4 from ~7% in q3 FY24. Revenue growth was hit by price cuts (~3.5% in Q4), and an unfavorable product mix (subdued growth of the premium segment). .Benign raw material prices continue to drive gross margin, which stood at 43.7% in Q4, the best in the last 12 quarters. Asian Paints’ gross margin will be the key monitorable in FY25/FY26, considering the changing competitive landscape and dwindling raw material price benefits..Employee and other overheads (higher marketing and distribution spending) hurt Ebitda margin, which contracted 180 basis points YoY and 325 bp QoQ to 19.4%. The marketing spending also accelerated due to the recently launched Neo Bharat Latex Paint (in the economy segment). Ebitda declined 9% YoY (estiamte +6%). Asian Paints achieved a 21% Ebitda margin in FY24. Management reiterated its Ebitda margin guidance of 18-20% in the medium term. Due to a changing competitive landscape, a higher mix of the economy/mid segments, and the company’s increased focus on volume traction, we model an Ebitda margin of 20.5% for FY25/FY26 (each)..Despite Asian Paints' various initiatives to drive volume growth, the revenue growth trend for FY25 is still weak due to price cuts, downtrading, and competitive pressure. Besides, the elevated Ebitda margin may not sustain in the near term. Consequently, we reiterate our Neutral rating with a target price of Rs 3,000 (based on 45 times FY26E earnings per share)..Click on the attachment to read the full report:.Asian Paints Q4 Results Review - Volume Growth Holding Up; Brand Spend To Aid Market Share: Systematix.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Asian Paints Q4 Results Review - Focus On Volume Growth; Margin Risk Still Persists: Motilal Oswal

With the entry of new players having deep pockets and massive commitments to investments, the overall industry may see a shift in market share and cost structures

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