Asian Paints Q1 net profit seen up 16% at Rs 257 cr

Asian Paints is expected to report a rise of 16% (YoY) in its first quarter FY12 net profit to Rs 257 crore against Rs 222 crore in the corresponding quarter last fiscal.

Net sales are likely to go up 23% to Rs 2242 crore from Rs 1,830 crore year-on-year.

EBITDA in the first quarter is seen going up 12% (YoY) to Rs 389 crore versus Rs 347 crore.

Factors

-Expect Asian Paints to report net sales of INR 22.5 billion a growth of 23%

-Expect strong demand in tier-II cities and small towns will lead to around 15% volume growth in domestic decorative

-International business is expected to report flat sales growth due to a decline in sales in the key Middle East market (52% of international sales)

-Estimate 200 basis points decline in gross margins YoY to 40.7% and EBITDA margins are expected to decline 300 basis points to 17%

-Average titanium dioxide prices are up around 33% YoY in 1QFY12 and ruling at all time highs

-The pricing environment is rational with no price-led competition

-Asian Paints increased prices in May and June (4.3% and 2.4% respectively) and a 1.3% increase is likely in July (in enamels)

What to look for

The trend in gross and EBITDA margins in the domestic business as input costs have been moving up steadily