Hold Asian Paints; target of Rs 3845: R K Global

R K Global has recommended hold rating on Asian Paints with a target of Rs 3845, in its May 10, 2012 research report.

“Asian Paints reported a stable and very impressive numbers in fall Q4FY’12 (Fourth quarter) as consumer demand across segments has been relatively robust despite initial signs of softening in certain categories in Q3FY’12. Stand. Revenue for the Q rose by ~29% YoY (beaten our estimates by ~2%), on the other hand profit for the Q rose by a tumultuous ~43% YoY (~7% ahead of our estimates).”
“Asian Paints has reported splendid performance for the 04thQ quarter ended FY’12 with a ~26% growth in revenues and ~25% increase in the Net Profit at Rs9,707 mn. For the Q4FY’12, revenue rose by a good ~29% YoY at Rs20,758 mn, while profits stood at Rs2,447 mn serving a ~43% jump on a YoY basis. The company continues its healthy revenue growth momentum in Q4FY’12 as well. The growth would be driven mostly by price increases as the full impact of price hikes taken over the past one year to mitigate the input cost impact, and we feel that hereon, the positive effect will be visible in Q1FY’12. While the decorative segment and auto paint business witnessed good demand, the industrial business has witnessed some pressure due to subdued demand. On the international business, the company has witnessed good growth in the South Asian and Oman countries. The overseas business has reported 31% growth in the top-line at Rs4,701 mn. Political events and macroeconomic uncertainty in some countries continued to affect the international performance. Margins remained flat, where operating margins stood at ~16%, while PATM gained ~100 bps to ~12% for the Q4FY’12.”
“Near-term upsides to remain questionable, long-term story remain intact as growth momentum remains extremely strong. However, impact of raw material prices is expected to induce further pressures. At CMP, the stock trades at a ***P/E of ~28x and ***P/BV of ~9.9x using FY’13E EPS and BVPS of Rs132 and Rs372 respectively. We re-reiterate our earlier stance with a HOLD, with a re-valued TP of Rs3,845 (a potential upside of ~4% from current levels), for a 12M period. Our TP is based on P/E of ~29.1x of FY’13E EPS of Rs132 and P/BV of ~10.3x of FY’13E BVPS of Rs372,” says R K Global research report.   FIIs holding more than 30% 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

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