Asian Paints (NS:ASPN): APNT’s revenue grew 5.4% in Q3 to INR 91.0bn (HSIE: INR 91.9bn). Decorative clocked 12/5.5% volume/value growth and industrial business grew ~11% YoY in Q3FY24. Luxury and economy products supported growth in the deco segment. Growth was balanced across rural and urban markets. Normalizing input costs coupled with operational, formulation and sourcing efficiencies led to margin expansion. GM/EBITDAM expanded 504/393bps YoY respectively to 43.6/22.6% (HSIE: 43.6/21.4%). We’ve cut our FY25/26 EPS estimates by 0.9/4.4% to account for lower volume growth in FY25/26. Maintain REDUCE with an unchanged DCF-based TP of INR 3,150/sh, implying 48x Mar-26 P/E.
LTIMindtree (NS:LTIM): LTI Mindtree (NS:MINT) (LTIM) delivered a soft Q3, impacted by higher-than-usual furlough and weakness in discretionary projects, which is likely to extend into Q4. The bright spots that provide visibility for growth acceleration in FY25E are (1) strong growth in deal bookings with 25% YoY (15% QoQ) in total contract value and (2) deal pipeline at USD 4.6bn, up by 30% YoY including several vendor consolidation and multiple services cost optimization deals, in addition to lower DSO and improved FCF. LTIM’s growth deceleration in FY24E is emanating from the erstwhile Mindtree portfolio while the ERP service line is relatively resilient, driven by greater thrust on cost optimization deals. Conversely, the recovery trajectory for the company can be sharper with a pick-up in discretionary services. We continue to expect LTIM to provide a sustainable outperformance as compared to larger peers over the medium term (LTIM- In the big league), however, risks about a large BFS client and delayed recovery can act as deterrents. Downgrade LTIM to ADD (BUY earlier), valuing the company at 28x FY26E EPS.
Asian Paints
Broadly In-Line Performance; Not Much to Cheer About!
APNT’s revenue grew 5.4% in Q3 to INR 91.0bn (HSIE: INR 91.9bn). Decorative clocked 12/5.5% volume/value growth and industrial business grew ~11% YoY in Q3FY24. Luxury and economy products supported growth in the deco segment. Growth was balanced across rural and urban markets. Normalizing input costs coupled with operational, formulation and sourcing efficiencies led to margin expansion. GM/EBITDAM expanded 504/393bps YoY respectively to 43.6/22.6% (HSIE: 43.6/21.4%). We’ve cut our FY25/26 EPS estimates by 0.9/4.4% to account for lower volume growth in FY25/26. Maintain REDUCE with an unchanged DCF-based TP of INR 3,150/sh, implying 48x Mar-26 P/E.
Q3FY24 highlights: Q3 consolidated revenue grew 5.4% YoY to INR 91.0bn (HSIE: INR 91.9bn). The decorative and industrial business collectively clocked +12/6.1% volume/realization growth in Q3. Growth was supported by the extended festive season with some moderation in the later part of Q3. Management intends to clock double-digit volume growth in coming quarters. International business remained flat YoY at INR7.8bn as good growth in the Middle East/Africa cushioned the decline in Asia revenues (courtesy of macro-uncertainties in Bangladesh). Within the industrial business, automotive (PPG-AP) and general industrial (AP-PPG) segments grew 12.3/10.1% respectively. PBT margins for PPG-AP/AP-PPG stood at 22.2/11.5% in Q3FY24. Overall, continued RM deflation (-0.2%) along with operational, formulation and sourcing efficiencies led to margin expansion. Consolidated GM/EBITDAM expanded 504/393bps YoY respectively to 43.6/22.6% (HSIE: 43.6/21.4%). Management expects this to continue in Q4. APAT grew 34.5% YoY to INR 14.75bn (HSIE: INR 14.03bn). Note: Management took a 1% price correction in Q3. APNT added 2k touchpoints in Q3. Inorganic expansion at both Khandala and Kasna has been completed (production capacity – 4,00,000/1,00,000 KL p.a. respectively).
Outlook: Weak demand and rising competitive intensity are likely to keep top-line growth in check (~10% CAGR over FY24-26). This is also likely to keep the pricing lever out of play for some time. We’ve cut our FY25/26 EPS estimates by 0.9/4.4% to account for lower volume growth. Maintain REDUCE with an unchanged DCF-based TP of INR 3,150/sh, implying 48x Mar-26 P/E.
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