- 14 Jan 2025
- ICICI Securities
SURGE IN THE CRUDE PRICES WILL PUT STRESS ON THE MARGINS OF PAINT COMPANIES
News: Paint companies' margins to remain under pressure with a surge in crude oil prices. Crude oil prices have surged by 10% since Nov,24 and are currently trading at around $81-82 per barrel. Crude derivatives form 25-30% of Paint companies raw material cost.
Views: Any sustained surge in the crude oil prices from the current levels will put stress on the margins of the paint companies. In the current weak demand environment paint companies have taken low single digit price hikes in the last few months. This price hike will not suffice to reduce stress on the margins. In Q3FY2025, paint companies are expected to see a dip in the EBIDTA margins due to high raw material cost and moderate sales volume growth. Industry leader Asian Paints EBIDTA margins are expected to be lower by 350-400BPS in Q3FY2025 with gross margins expected to lower by 180-200BPS. However any sustained surge in crude oil prices will further put stress on margins of the paint companies, which are reeling under competitive pressure from large new entrants.
Impact: Negative