Hold Asian Paints; target of Rs 2742: SPA Research

11883 Investors following Asian Paints. Share this News with them.

0

Like this story, share it with millions of investors on M3

Hold Asian Paints; target of Rs 2742: SPA Research

SPA Research has recommended hold rating on Asian Paints with a target of Rs 2742, in its January 25, 2012 research report.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Buy GAIL India; target of Rs 505: Arihant capital markets Buy TTK Prestige; target of Rs 2681: Firstcall Research Buy Vijaya Bank; target of Rs 61.50: IIFL ALSO READ See previous views by SPA Research See what other Experts & Brokerages are saying about Asian Paints See messages about Asian Paints Asian Paints BSE | NSE 29/05/12 Are Mutual Funds betting on Asian Paints?

SPA Research has recommended hold rating on Asian Paints with a target of Rs 2742, in its January 25, 2012 research report.

"Asian Paints reported better than expected YoY consolidated revenue growth of 22% to INR 25,605mn in Q3FY12 on back of strong domestic demand and higher realizations. Despite weighted avg. price increase of ~10.53% YTD in domestic decorative paints, EBIDTA margins came lower than expected at 15.52% (a YoY fall of 91bps) due to sharp rise in raw material cost and higher pressure on margins in international business and industrial paints. Consolidated PAT grew by 16.58% to INR 2,569mn (~8% lower than our expectation)."

"Asian Paints standalone business reported YoY growth of 20.52% in Q3FY12 to INR 21,095mn. This is on the back of strong demand from consumers and aggressive price hikes (~10.53% YTD) taken to protect margins. Standalone PAT grew by 21.24% YoY to INR 2,505mn. The growth in volumes has been lower in 9MFY12 compared to previous year owing to high inflation, continuous price increases and uncertain economic environment. Going forward, we expect some moderation in demand owing to expected slowdown in economic growth. Reducing ability of company to take higher price hikes will result in slower standalone sales growth of 18.08% in FY13. Despite aggressive price hikes in domestic and international markets, consolidated gross margins and EBIDTA margin declined by 89bps and 91bps YoY to 39.41% and 15.52% respectively. Margin erosion is attributed to higher raw material cost inflation and depreciating INR vs USD (~25% of RM is imported). Key raw material like TiO2 (~25% of RM) saw increased prices of ~45% YTD. Other crude derivatives also continued to remain at elevated levels and increased on back of depreciating INR. However, the only silver lining is the stabilization in RM cost inflation in international markets in last two months. Going forward, we expect cost pressure to subside resulting in expansion in EBIDTA margins."

"With expected slowdown in revenues (20% FY11-13 CAGR) and PAT (16.58% FY11-13 CAGR) growth, we reduce the multiple assigned previously from 25x to 23x. Therefore, with change in estimates and downgrading of multiple, we revise our target price downwards to INR 2,742 (23x FY13E EPS). Our target price is 2% discount to CMP. We recommend Hold," says SPA Research report.   

Non-Institutions holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment