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High volume growth trend continues

* Volume growth in 1QFY23 was 37% off a low base.

* APNT clocked healthy volumes and value CAGR of ~20% in the first quarter after a period of four years.

* Demand sentiment is stable, and the management expects to see double-digit growth going forward as well.

* There is no excessive stocking at the retail level.

* Larger centers driving growth and mix improvement

* Demand in Tier I and II centers is growing faster as was the case in 4QFY22, leading to better mix, especially in sales of products like premium emulsions.

* Tier III and IV centers are seeing some down-trading due to steep price increases

cost and margin

* APNT saw a further 6% sequential RM inflation in 1QFY23. It has raised prices by 2% in 1QFY23. Sequential inflation in 2QFY23 is likely to be in low single-digits (and ~25% YoY). While crude oil prices are coming down, the depreciation in the INR v/s the USD is impacting margin, as inflation in other RM.

* Better mix and costs savings have enabled stable sequential margins in 1QFY23.

* APNT is likely to raise prices by 0.5% in the first week of Aug’22. It is taking measured increases so as to not upset the demand environment.

* Gross margin is likely to remain in the 38-40.5% band for some time.

* RM inflation is expected to ease gradually in 2HFY23.

Launches, expansions, and extensions

* APNT has several launches at the top end (premium and luxury) on an overall portfolio basis.

* It added 5,000 retailing points in 1QFY23 and is incrementally planning to add 5,000-8,000 outlets annually.

* Currently, it has 31 Beautiful Home Stores operational.

* Beautiful Home: The personalized interior design service is now being offered in nine cities

Other businesses

* Waterproofing and construction chemicals are doing well

* White Teak, which it recently acquired, reported sales of INR200m in 1QFY23 v/s INR570m in FY22.

* Its international operation reported double-digit sales growth. Strong growth was seen in Nepal and Bangladesh. Sri Lanka and Egypt are facing severe currency issues.

* Demand in the Industrials and Automotive business remains strong. Powder coating, which caters to demand from products like fans and helmets, too has done very well

Other points

* Capex for FY23 stands at INR8b. ? Tax rate for FY23 should be ~27%

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