Asian Paints Q2 FY25 Earnings: Net Profit Drops 42%
Company Overview
Asian Paints Ltd. is India’s largest paint manufacturer and one of the leading paint companies globally. Founded in 1942, it operates in more than 15 countries and has over 26 paint manufacturing facilities worldwide. It is No.1 or No.2 in its each segment, showing a great brand. Its product portfolio extends beyond decorative paints to include industrial paints, coatings, home decor, and waterproofing solutions, serving residential, commercial, and industrial markets. It has more than 140,000 customers and 3000+ dealers and 160,000+ retail touchpoints. The company has filed approx. 21 patents, Asian Paints has established itself as the most recognizable brand in India’s paint market. Through initiatives like the ‘Beautiful Homes Service’ and online colour consultation tools, Asian Paints enhances customer experience, leveraging digital solutions to strengthen customer engagement.
Industry Outlook
The Indian paints industry is projected to grow at a CAGR of 11-13% over the next five years, aiming to reach a valuation of ₹1.2 lakh crores by 2028. Demand for water-based paints, low-VOC (Volatile Organic Compounds) products, and anti-bacterial coatings is on the rise, driven by eco-conscious and health-focused consumers. Major players, such as Asian Paints and Berger Paints, are continuously investing in R&D for product innovation and are expanding manufacturing capacities to meet rising demand. Infrastructure growth and government focus on boosting the manufacturing sector are expected to increase demand for industrial coatings, especially in construction, automotive, and machinery sectors. Crude oil derivatives are key inputs for paint manufacturing, and price fluctuations can impact profit margins.
Financial Summary
Business Segments:
- Decorative Business: The Company offers interiors and exterior wall paints, waterproof solutions, textured coatings, etc. with major products like Royale, TruCare, Apcolite, etc. It includes service of Beautiful Homes Service which shares about 4% in total revenue of company and includes services for kitchens, wardrobes, bath fittings, Sanitaryware, decorative lightings, rugs, furniture, etc. provides customers every possible services.
- International Business: Asian Paints has a global footprint with manufacturing operations and markets across 15+ countries in the Middle East, South Asia, Southeast Asia, and the Caribbean. While international operations currently represent a smaller portion of total revenue, they contribute to the company’s goal of becoming a leading player in emerging markets.
- Industrial Business: The Company operates in the industrial coatings segment through a 50:50 joint ventures with PPG Industries Inc. It offers custom-formulated products for the automotive and industrial sectors, including automotive, marine, and packaging coatings, as well as industrial protective coatings.
Q2 FY25 & Business Highlights
- Revenue of ₹8028 crore in Q2 FY25 down by 5.32% YoY from ₹8479 crore in Q2 FY24.
- EBITDA of ₹1240 crore in this quarter at a margin of 15% compared to 20% in Q2 FY24.
- Profit of ₹694 crore in this quarter compared to a ₹1232 crore profit in Q2 FY24.
- Decorative Business registered volume decline of 0.5% with revenue decline of 6.7%, due to weak consumer sentiments coupled with rains and floods in some part country impacted the consumption.
- All categories in the Home Decor business benefited from synergies with our Beautiful Homes stores network, though at a lower clip than expectations.
- Forex loss on currency devaluation (₹ 56 crore in Ethiopia) along with subdued performance in Asia impacted overall profitability
- International business registered a marginal value decline despite some challenging market conditions in Ethiopia and Bangladesh. Though on a constant currency basis, the international portfolio delivered revenue growth of 8.7% for the quarter.
Subsidiary Information:
- Asian paints international Pvt Ltd.: Asian Paints International Private Limited (“APIPL”), Singapore, is a wholly-owned subsidiary of the Company and is the holding company for all of its subsidiary companies carrying out operations overseas. The principal activities of APIPL are those of investment holding and management. The Board of Directors at its meeting held on 28th March 2024, approved an investment of approximately ₹200 crores by way of subscription of equity shares of APIPL, for repayment of borrowings.
- Asian Paints (Nepal) Pvt Ltd: Asian Paints (Nepal) Private, is a subsidiary company of the Company. Its principal business is the manufacturing and selling of paint products in Nepal. The revenue of AP Nepal was ₹335.04 crores with de-growth of 38.5% YoY.
- Obgenix Software Pvt Ltd: It is popularly known by the brand name “White Teak” is a subsidiary company of the Company. White Teak is engaged in the business of decorative lighting products, fans and other décor accessories. The revenue of White Teak was ₹133.43 crores with growth of 23.0% YoY.
- Weather seal Fenestration Pvt Ltd: It is a subsidiary company of the Company. Weatherseal is engaged in the business of uPVC windows and doors. The revenue of Weatherseal was ₹51.68 crores growth of 110.0% year on year.
SWOT Analysis:
Strengths:
- Market Leadership
- Diverse Product Portfolio
- Strong Distribution Network
Weaknesses:
- Dependency on Raw Materials
- Limited Presence in Industrial Coatings
Opportunities:
- Expansion in Rural Markets
- Rising Demand for Eco-Friendly Products
- Growth in Home Improvement Solutions
Threats:
- High Competition
- Volatile Raw Material Prices
- Environmental and Regulatory Risks
- Potential Economic Slowdowns