Asian Paints investors feel the blues even before competition hits full throttle
₹2,670.10 on Friday, after closing nearly 5% lower on Thursday, following the Q4 earnings announcement. Investors are nervous about the emerging pain points. For instance, the year-on-year decline in revenue, albeit marginal, was particularly disappointing.
At ₹8,730.8 crore consolidated revenue lagged expectations impacted by price cuts (of around 3.5%), downtrading and an unfavourable product mix (weak growth of the premium segment). While the company delivered around 10% year-on-year volume growth in domestic decorative paints in Q4FY24, the value-volume gap widened further. “We believe the effects of rising competitive pressures are visible in the performance of Asian Paints," said analysts at ICICI Securities Ltd.
The brokerage house reckons (comfortable) competitive equilibrium in the paints sector is likely broken. However, Asian Paints’ management is optimistic about double-digit volume growth in FY25. This is likely to be driven by the focus on economy paints, putty, and primer.
The company launched Neo Bharat latex-based emulsion in January, which is focused on the entry-level segment. Further, improvement in the B2B sales post election and continued thrust on distribution expansion are seen as volume growth levers. On the distribution front, over the past three years, Asian Paints has added 40,000-45,000 retail touchpoints.
It added 10,000 retailers in FY24 and aims to take overall reach to 1,63,000. According to the management, the new competition is not bringing any new technology and playing on a discounted pricing strategy. The management is confident of the company’s strong brand recall both at channel and consumer levels.
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