Asian Paint hike prices
Building its war chest against the rising inflation pressure, Asian Paints Ltd has adopted strategy of taking price hikes.
The move is well appreciated by its investors. The market leader in decorative paints is taking another round of price hike effective 5 December.
The latest hike is 4–5% would bring the total hike to around 19% year-on-year (y-o-y).
Investors would reckon that Asian Paints saw robust volumes growth of 34% in the September quarter. However, gross margins contracted a sharp 970 basis points y-o-y as prices of key input material titanium dioxide and other crude-based monomers remained high. One basis point is one hundredeth of a percentage point.
Asian Paints took a 4% price increase in 2QFY22 on a 6% sequential raw material cost increase during the September quarter. Dealers channel checks by various brokerages showed that the company had raised prices in October by 5-6% across various products.
Reacting to this development, shares of the company rose around 3% intraday on the NSE on Wednesday. Usually, peers follow Asian Paints when it comes to taking prices hikes. So, in that sense, this bodes well not only for investors in Asian Paints, but for those having exposure in other paint stocks as well.
Going ahead, what also remains to be seen is the impact of price increases on the industry’s volumes growth, especially now that new companies are entering this sector.
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