Paint companies are likely to close FY2023 with a strong revenue growth of 18 per cent, mainly led by higher realizations on the back of 6 per cent price increase during the year.
Crisil says the volume expansion and resultant cash generation will help paint companies maintain healthy balance sheets, which will also protect credit profiles, despite rising capex.
Continued healthy demand from the construction, real estate and automobile sectors will help the paint sector register 10-12 per cent revenue growth this fiscal, as against 18 per cent in the recently concluded fiscal, said a report. An expected increase was recorded. The volume expansion and consequential cash generation will help paint companies maintain healthy balance sheets, which will also safeguard credit profiles despite rising capex, Crisil said in a report on Wednesday.
The top five companies have announced capex of Rs 12,000 crore in FY2023 and 2024, up from Rs 7,000 crore in the previous four financial years. New players are expected to add about one-third of the total existing capacity of 4.2 billion liters by the end of FY2025, the report said.
Paint companies are likely to close FY2023 with strong revenue growth of 18 per cent, mainly due to higher realizations on the back of 6 per cent price hike during the year, with the full impact of 20 per cent price hike expected in the third quarter of FY22. quarter.
Based on the top five companies, the agency said in the report that operating margins in FY24 would remain stable at 15-16 per cent on the back of healthy volume growth as well as moderation in crude oil-linked input prices, which is higher than last fiscal. Almost identical. 65,000 crore industry or 90 per cent of the 4.2 billion liters annual capacity.
The report also said that despite aggressive capex spree of all major paint companies, their debt-free balance sheets would support the credit risk profile.
The domestic paints sector also includes the decorative segment, which accounts for 80 per cent of the market.
According to Anuj Sethi, a senior director with the agency, the demand for paints typically grows at 1.6x-2x of GDP. Decorative paints revenue is expected to grow by 11-12 per cent this fiscal due to increase in renovation/construction activities and higher preference for branded products.
On the other hand, Industrial Paints’ revenue will grow by 8-9 per cent, driven by higher government spending on infrastructure and sustained demand from the automotive segment, Sethi said.
Since the key raw material is crude-linked derivatives, a 30 per cent fall in crude oil prices from $115 a barrel to $85 a barrel now in June-July 2022 will help boost operating margins. But this will be largely offset by higher selling expenses due to aggressive sales push and increase in advertising spend by industry leaders to counter competition from new entrants.
Another margin risk is a fall in the rupee, which the agency sees trending at 82-83 per dollar in FY23 from 80.2, impacting the cost of imported materials, which account for a third of their total raw material requirements. Is.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)
