Asian Paints Q2 Results: High Costs May Limit Growth as Investors Await Key Insights

Asian Paints Ltd, a leader in paints and home decor in India, is slated to announce its Q2 FY25 results on Saturday, November 9, 2024. The paint major is likely to deliver muted numbers for the quarter due to margin pressure from increasing cost inputs. Investors will keenly look into the revenue growth numbers, volume figures, and how the company manages the raw material expenses that have been elevated in the industry for some time.

Revenue Growth Expectations for Asian Paints Q2 FY25
Asian Paints is likely to report revenues of approximately ₹8,568 crore during Q2 when the corresponding quarter last year had reported revenues of ₹8,451.9 crore. However, if the first quarter of FY25 is taken into account where the company reported a decline of 2.3% in net sales in terms of YoY growth, the second quarter too would depict underlined growth as the high raw material cost remains well in view. Asian Paints too had reported a decline in Q1 FY25 revenues by more than 2%. So, it is quite tough for the company until now this year.

Painful High Input Costs and Margins
High input cost has been one of the issues that has haunted Asian Paints. It substantially pained the profit margins of the company. In Q1 FY25, the EBITDA margin slipped to 18.9 percent from 23.1 percent in the same period last year due to cost pressures. As a response, the company has implemented a very minor 1% price increase in July, which can in part offset the increasing cost of inputs. However, analysts will examine if the rise has had a meaningful impact to improve margins or if further pricing adjustments will be required to address cost pressures.

Focus on Volume Growth Amid Seasonal Trends
Volume growth remains a hotbed for the September quarter. Asian Paints managed a 6% growth in volumes for Q1 FY25, though had guided a recovery to 10-11% for Q2, especially with the belief that monsoon season prospects will improve after the election season. Investors will look for evidence whether Asian Paints managed such a recovery, especially as the monsoon season is known to depress activity in certain regions where painting works stop during heavy rainfall.

Segment Performance and Growth Strategy
Asian Paints has a growing home décor footprint and an industrial segment besides paints. While international business was little down in Q1 FY25, there are strands of revival for home décor. Investors, therefore, would be looking closely at the industrial segment, which had registered single-digit growth in Q1. Recently, the company announced increasing its production capacity at its Mysuru plant from 300,000 KL to 600,000 KL per annum. Therefore, the move implies an unprecedented long-term growth strategy that has huge potential to boost volumes going forward.

Interim Dividend Announcement on Agenda
The company's board would discuss the declaration of an interim dividend for FY25 along with its quarterly performance report scheduled on November 9. The record date would be November 19, 2024, in case of declaration. This is a significant update for shareholders as Asian Paints has been declaring dividends for quite some time now. Any adverse news on this front could weigh upon investor sentiment.

Asian Paints Stock Performance
Asian Paints shares have witnessed some volatility in the run-up to the declaration of its Q2 results. Last Friday, November 8, the stock closed 2.67% lower at ₹2,767 on the NSE. However, over the longer term, the company's stock has demonstrated resilience and its year-to-date performance is quite strong. The stock, however, has declined more than 18% so far in 2024 and 10.35% over the past year, reflecting the market's concern regarding profitability amid rising costs.

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