Results Review for Asian Paints, Shriram Finance, Colgate-Palmolive, Symphony

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  • Editors Pick

Asian Paints (NS: ASPN ): APNT’s revenue growth flat-lined in Q2 (YoY) at INR 84.8bn, 4.4% below our expectation (HSIE: INR88.7bn). Decorative business clocked 6/1.1% volume/value growth in Q2FY24. The mix was economy range-heavy. Urban markets (high-single-digit growth) continued to outpace rural centres. Normalizing input costs coupled with operational and formulation efficiencies led to margin expansion. GM/EBITDAM grew 764/573bps respectively to 43.4/20.2% (HSIE: 41.5/20.3%). We’ve cut our FY25/26 EPS estimates by 5-6% each to account for higher A&P spends/incentives (targeted to spruce up demand amid rising competitive intensity). Maintain REDUCE with a DCF-based TP of INR 3,000/sh (earlier: INR 3,200/sh), implying 48x Sep-25 P/E.

Shriram Finance Ltd. (NS: SHMF ): Shriram Finance’s (SHFL) earnings were marginally ahead of estimates on the back of 60bps QoQ NIM reflation (8.9%), offset by higher credit costs (2.4%). SHFL reported another strong quarter of AUM growth of 20%YoY (north of management guidance), led by PV, MSME and PL segments, while growth in the CV portfolio was steady (+13% YoY). NIMs surprised positively on the back of an increasing share of higher-yielding segments and lower negative carry, however, we believe that margins have peaked and are likely to trend lower. Credit costs were elevated (2.4% annualized) due to higher write-offs, with QoQ improvement in GS-II/GS-III at 7.2%/5.8% (Q1FY24: 7.8%/6%). The merged franchise continues to seek opportunities to sustain high loan growth, including synergies from the merger and other partnerships, which remain monitorable. We tweak our FY24/FY25 estimates to factor in higher loan growth and NIMs, and maintain ADD with a revised SoTP-based TP of INR2,005 (standalone entity at 1.4x Sep-25 ABVPS).

Colgate (NS: COLG ) Palmolive: Colgate’s Q2 print was a mixed bag with revenue growing at a steady pace of 6% (HSIE 7%) while EBITDA was up by 18% (HSIE 15%). Volume was flat in Q2 after clocking low single-digit growth in Q1. Price hike continued to support revenue growth for Colgate (marginal price hike in August) unlike peers where price cuts have been initiated. Domestic revenues grew by 7% with toothpaste registering high-single-digit growth. Growth was largely value-led as volumes were flattish YoY (+1% on a four-year CAGR basis). There are early signs of recovery especially in urban markets while rural shall continue to make a gradual recovery. GM expanded by 500bps YoY to 69% (up 35bps QoQ). Colgate doubled up on the relaunch of its flagship ‘Colgate Strong Teeth’ brand, leading to a 30% increase in A&P spending (14% of revenues). While employee costs grew 12%, other expenses fell 3% due to better cost control and deferment of certain expenses. As a result, EBITDA grew by 18% (HSIE: 15%) while EBITDAM expanded by 340bps YoY to 32.8% (HSIE: 31.5%). Colgate continues to focus on (1) the increase in per capita consumption (particularly in rural where 55% of households don’t brush daily), (2) premiumising through science-based innovation, and (3) building personal care. We value Colgate at a 40x P/E on Sep-25E EPS to arrive at a TP of INR 2,000. Maintain ADD.

Westlife Foodworld Ltd (BO: WEST ): Westlife Q2 performance was weaker than expected as revenue and EBITDA clocked 7/1% YoY growth (HSIE 11/9%). Demand deceleration continued to impact QSR players, Westlife showed strong resistance earlier but is now a victim of the same. SSSG was at +1% (7% in Q1, HSIE 3%) as demand in dine-in continued to see normalisation (dine-in/delivery up by 7% each in Q2 vs. 18/9% in Q1). GM expanded 80bps YoY to 70% while EBITDA margin (pre-IND AS) was down by 150bps to 12%, impacted by negative op-lev and 60bps royalty increase. PBT was down by 28%, while the margin is at 5% (down 240/170bps YoY/QoQ). Notwithstanding near-term demand pressure, Westlife remains confident of high single-digit SSSG with 40-45 yearly store additions in the medium term. We expect Westlife to continue to fare better vs. its peers, given (1) a wide menu catering to various price segments across day parts, (2) sustained dine-in footfall, and (3) multiple levers for margin expansion (full McCafe roll-out, menu expansion, etc.). Owing to a weak demand environment and the miss in Q2, we cut our FY24 EPS by 5%. We value Westlife at 55x P/E on Sep’25 EPS to arrive at a TP of INR 850. Maintain ADD.

Symphony (NS: SYMP ): Symphony delivered better-than-expected revenue for domestic business in the non-seasonal quarter. Domestic revenue was up 1% after clocking a 15% decline in Q1, which was impacted by an erratic summer (H1FY24 down 7% YoY). Product innovation, higher distribution reach (semi-urban and rural), and increasing presence in alternate channels (30% vs. 10% pre-COVID) support during non-season Q2. RoW business continues to remain a drag, the healthy performance of IMPCO Mexico/GSK China was offset by weak demand in CT Australia. Domestic/RoW EBIT grew by 15/-75%. Despite its domestic channel inventory being slightly higher than normal, Symphony remains optimistic about delivering growth in both revenue and EBITDA in FY24. With the aim of de-risking its business from seasonality, Symphony continues to focus on (1) geography expansion, (2) channel diversification, and (3) product expansion into adjacent segments. RoW execution is still WIP and consistent performance is still missing. We maintain our estimates and the stock at 30x P/E on Sep’25E EPS and derive a TP of INR 900. Maintain REDUCE.

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