Accumulate Asian Paints; target of Rs 4850: Dolat Capital

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Dolat Capital is bullish on Asian Paints and has recommended accumulate rating on the stock with a target of Rs 4850 in its January 21, 2013 research report.
 
“Asian Paint reported a consolidated revenue growth of 19.2% to Rs 30.5bn. EBITDA at Rs 5.1bn was up 26%% YoY as margins expanded by 94bps to 16.7%. Gross margin expanded by 104bps YoY to 40.6%. PAT at Rs 3.35bn was up 30.5% YoY. Standalone business (decorative paints) reported revenue of Rs 25.37bn up 20%. EBITDA grew by 22.9% as margin expanded by 42bps to 17.8%. We estimate a volume growth of 12-13% during the quarter. Higher growth in premium segment would have resulted in mix improvement in addition to price effect of 6%. RM Index witnessed a sequential decline and was up 2.56% YoY. Subsidiary business (Industrial and International) reported a 13.9% revenue growth to Rs 5.15bn and EBTDA grew by 56% to Rs 592mn. International business in the Middle East and Asia region report strong performance.”
 
“Volume growth at 12-13% (8% vol growth in Q3FY12) was impressive. Decorative business was good across the country driven by festive season. Strong growth was witnessed in Tier I and II markets. Industrial business was impacted due to poor demand from projects business and slowdown in OEM segment. We continue to remain positive on Paint sector from a long term prospects. We have revised our estimate for FY13 and FY14 by 1-5% to factor in better volume growth and margin improvement. We have introduced FY15E and expect an EPS of Rs172.8. Stock trades at 29x FY14E EPS of Rs 147.3 and 25x FY15E EPS of Rs 172.8. We roll over our target price to FY15 and recommend an Accumulate with a price target of Rs 4850,” says Dolat Capital research report.

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