Buy Asian Paints; target of Rs 4901: Firstcall Research

Firstcall Research is bullish on Asian Paints and has recommended buy rating on the stock with a target of Rs 4901 in its January 22, 2013 research report.
 
“Asian Paints is India's largest paint company and Asia's third largest paint company, with a turnover of Rs 96.32 billion. The group has an enviable reputation in the corporate world for professionalism, fast track growth, and building shareholder equity. Asian Paints operates in 17 countries and has 24 paint manufacturing facilities in the world servicing consumers in over 65 countries. Besides Asian Paints, the group operates around the world through its subsidiaries Berger International Limited, Apco Coatings, SCIB Paints and Taubmans. Forbes Global magazine USA ranked Asian Paints among the 200 Best Small Companies in the World for 2002 and 2003 and presented the 'Best under a Billion' award, to the company. Asian Paints is the only paint company in the world to receive this recognition. Forbes has also ranked Asian Paints among the Best under a Billion companies in Asia In 2005, 06 and 07, The company has come a long way since its small beginnings in 1942. Four friends who were willing to take on the worlds biggest, most famous paint companies operating in India at that time set it up as a partnership firm.”
 
“Over the course of 25 years Asian Paints became a corporate force and India's leading paints company. Driven by its strong consumer-focus and innovative spirit, the company has been the market leader in paints since 1968. Today it is double the size of any other paint company in India. Asian Paints manufactures a wide range of paints for Decorative and Industrial use. In Decorative paints, Asian Paints is present in all the four segments v.i.z Interior Wall Finishes, Exterior Wall Finishes, Enamels and Wood Finishes. It also introduced many innovative concepts in the Indian paint industry like Colour Worlds (Dealer Tinting Systems), Home Solutions (painting solutions Service), Kids World (painting solutions for kid's room), Colour Next (Prediction of Colour Trends through in-depth research) and Royale Play Special Effect Paints, just to name a few. Vertical integration has seen it diversify into products such as Phthalic Anhydride and Pentaerythritol, which are used in the paint manufacturing process. Asian Paints also operates through APPG (50:50 JV between Asian Paints and PPG Inc, USA, one of the largest automotive coatings manufacturer in the world) to service the increasing requirements of the Indian automotive coatings market. Another 50:50 JV with PPG has been proposed which will service the protective, industrial powder, industrial containers and light industrial coatings markets.”
 
“Asian Paints is India's largest paint company and Asia's third largest paint company, with a turnover of Rs 96.32 billion, reported its financial results for the quarter ended 31st Dec, 2012. Growth in the third quarter was good for decorative business across the country. The Quarter witnessed improved demand conditions during Diwali season. The company’s net profit jumps to Rs.3352.30 million against Rs.2568.60 million in the corresponding quarter ending of previous year, an increase of 30.51%. Revenue for the quarter rose 19.23% to Rs.30529.20 million from Rs.25605.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.34.95 a share during the quarter, registering 30.51% increase over previous year period. Profit before interest, depreciation and tax is Rs.5413.40 millions as against Rs.4198.90 millions in the corresponding period of the previous year.”
 
“At the current market price of Rs 4376, the stock P/E ratio is at 34.94 x FY13E and 30.11 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.125.23 and Rs.145.32 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 21.09 x for FY13E and 18.17 x for FY14E. Price to Book Value of the stock is expected to be at 10.49 x and 7.70 x respectively for FY13E and FY14E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 4901 for medium to long term investment,” says Firstcall Research report.

Non-Institutions holding more than 90% in Indian cos

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