For the second quarter in a row, Indian paint companies are likely to report volumes growth in double-digits. Dealers' channel checks by various brokerages indicate that decorative paint demand in the March quarter was robust, aided by the continued demand momentum in smaller cities and towns. Favourable base and market share gains from small unorganized players are other factors which are also likely to boost volumes for listed companies.
ICICI Securities Ltd estimates paint volumes to grow more than 15% in the March quarter. It says, the revival in the real estate sales post Diwali, is another contributor to paint demand, especially in urban areas.
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"Paint market has grown at 15-20% post Diwali. Paint sector generates ~10% revenues from real estate and we believe there was strong revival in paint demand in March quarter. We believe paint demand has a lag of one-two months from real estate registrations," the domestic brokerage house said in a report on 30 March.
Not just decorative paints, non-decorative paints segment is likely to make a comeback too.
"Channel checks by our auto team suggest +30% volume growth for Maruti Suzuki (~20% of Kansai’s sales) which will boost demand for auto paints," said a Prabhudas Lilladher report dated 31 March. It should be noted that Kansai Nerolac is the leader in the non-decorative paints segment and Maruti Suzuki Ltd is its biggest customer for auto paints.
The report further added that, similarly, higher demand for fans and white goods will boost demand for powder coating where Kansai is the market leader. However, the domestic brokerage house cautions of some margin pressure as pricing in these industrial segments usually is not in sync and always comes with a lag.
Meanwhile, to combat raw material inflation, selective paint companies have announced price hikes by around 2-3% in Q4FY21, showed the channel checks. Prices of crude-based monomers, which form a significant part of the sector's raw material costs, have been on an upswing in recent months.
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