Paint companies may witness high single-digit growth in Q4

Following continued recovery in volumes post-note-ban, decorative paints segment is likely to witness high single-digit growth in all regions, except in the South in the March quarter, says a report.
"Overall, we expect decorative paint companies to post high single-digit volume growth in the March quarter, except South, which may see only low single-digit growth in Q4," ICICI Securities said in a report.
Tamil Nadu, one of the largest markets in the South, was impacted by political disturbances (Jallikattu protests) and also due a High Court ban on registration of plots and houses in unapproved housing layouts.
"Though North was the most affected by demonetisation, it has witnessed significant improvement. Also, we expect good pick-up in growth in the East and the West after the note ban," the report added.

Although slightly lower than the double-digit growth posted in quarters before demonetisation, there is continued recovery in volumes post demonetisation.
The industry leader Asian Paints is likely to post volume growth of 6-7 per cent as its sales in the south was only slightly impacted. We expect other paint companies to post high single-digit 8-9 per cent volume growth, except Akzo which may clip at 4-5 per cent.

Even though all paint companies announced a price hike of 3 per cent in later February, we expect volume and value growth to be largely similar, the report said.
Margins are expected to decline as crude prices have steadily increased, stabilising at around USD 50 a barrel, up from USD 30-40 a barrel in Q3.

Paint companies are also looking at a consecutive price hike in Q1 of fiscal 2018, which will help shore up their bottomlines.