What are you making of the numbers? Is it a miss for Edelweiss and what about volume growth?
Revenue and volume growth wise it seems decent, ahead of our expectation. We were expecting definitely margin compression. The FMCG results which have come out till now in the broader consumption space — HUL and Nestle — also did see gross margin compression. We were expecting gross margin compression even for Asian Paints. So to that extent, the inflationary conditions are across the economy, across the world and that is not anything new.
Paint companies have taken 5% to 6% price hike but obviously that is not enough. But we do expect to see volume growth going ahead. The festive season is here. Real estate is seeing good recovery and we expect the outlook for volume growth to remain strong. But the next quarter or two, gross margins remain a key concern and the rupee-dollar equation also needs to be seen. Plus we have to see titanium dioxide and crude related inputs.
Asian Paints in the last five-six years, has grown its water based portfolio much faster and reduced the impact of crude oil but still the other raw materials like titanium dioxide also has been inflationary. So net-net, it is gross margin pressure and strong volume which is the outlook for the next one or two quarters.
