Asian Paints stock tanks 9%, hits over 3-year low on weak Q2 numbers

Weak consumer sentiments coupled with persistent rains through the quarter and floods in some parts of the country weighed on the company's September quarter performance

Shares of Asian Paints hit an over three-year low of Rs 2,511.65, as they tanked 9 per cent on the BSE in Monday’s intra-day trade after reporting a weak set of numbers for the second quarter ended September 2024 (Q2FY25).   The company's earnings before interest, tax, depreciation, and amortisation (Ebitda) margin declined to 15.5 per cent from 20.3 per cent in the corresponding period of the previous year. 

 

The stock has fallen below its previous low of Rs 2,671 that it touched on May 10, 2024. It is trading at its lowest level since May 2021. Thus far in the calendar year 2024, Asian Paints has underperformed the market by falling 27 per cent. In comparison, the BSE Sensex has gained 10 per cent during the same period.

 

 

In Q2FY25, the company’s consolidated net sales decreased by 5.3 per cent year-on-year (YoY) to Rs 8,003.0 crore as its decorative business in India registered volume decline of 0.5 per cent. The weak consumer sentiments coupled with persistent rains through the quarter and floods in some parts of the country also impacted consumption.  The paint marker's revenue was affected by price cuts taken last year, a shift in mix and increased rebates. The impact of price increases implemented during Q2 is expected to flow through in the second half of the year, the company said.

 

Asian Paints' Ebitda was down 27.8 per cent YoY to Rs 1,239.5 crore from Rs 1,716.2 crore earlier, while profit after tax declined by 42.4 per cent YoY to Rs 694.60 crore during the quarter.

 

The management said the paint industry faced a subdued demand environment during the quarter. On the margin front, soft demand conditions, product mix and material price inflation affected margins in Q2. The company expects margins to recover in the coming quarters on the back of anticipated softening in material prices coupled with price increases implemented in the last few months.

 

The paints industry is expected to grow at a steady rate with strong demand in the luxury segment, while analysts expect recovery in the demand in tier-3 and tier-4 towns.  In the medium- to long-term, the decorative paints industry is expected to register a 12 per cent compound annual growth rate (CAGR) over FY2023-FY2027 to Rs 1 trillion, led by a reduction in the re-painting cycle to 4-5 years (from 8-10 years earlier), increased construction activities of new real estate projects, acceptance of better Paints products in smaller towns, and upgradation of premium brands in cities and large towns, brokerage firm Sharekhan had said in Asian Paints in Q1 results update.  Moreover, a better product mix and efficiencies would help paint companies post higher margins in the long run, it added.