Asian Paints: Double digit volume growth to continue …

14 Feb 2024 , 01:05 PM

Analysts of IIFL Capital Services hosted Asian Paints (APNT) at the IIFL’s 15th Global Investor Conference in Mumbai. Management sounded confident on the overall paints sector growth, which is currently at ₹800 bn and expected to grow to ₹1000 bn in the near term. Products in the waterproofing segment and putty are growing faster and the trend is likely to continue. Retaining/growing the market share would be the priority and the Ebitda margins in the medium term are expected to be in the range of 18-20%. While the competition from both organised and unorganised players exists, management mentioned they have internal strategies in place to combat it. 

Double digit volume growth should continue going ahead: 

Management expects double digit volume growth going forward on the back of strong demand outlook from smaller cities and towns relative to urban coupled with rural recovery. The company has taken price cuts of ~1.3% in this year and is the trend is likely to continue in the near term. Within decorative, the premium range in likely to grow higher as customer preferences are changing and going on the incremental side. In urban markets, apart from influencers, the interior designer say is also important for choice of paints. 

50% capacity addition in next 4-5 years: 

While the volume growth is expected to be in double digit going forward, the company is planning to increase their capacity by 50% through both green field and brown field expansion. With current capacity ultisiation at around 80% levels, the Greenfield capacity is expected to come online by FY26-27 and would take 2-3 years to reach optimum utilisation levels.

Prepared for increasing competition: 

The competition in the paints sector has been a key factor in the recent years, however management highlighted that they have internal strategies in place to take on the competition. With Grasim expected to enter the market by end of FY24, a lot of actions would actually depend upon the terms with which the competitor enters. Management also mentioned that a large part of growth for unorganised players comes from a customer base which is price conscious.