Hold Asian Paints; target Rs 3340: Emkay

Emkay Global Financial Services has recommended hold rating on Asian Paints with a target of Rs 3340, in its May 10, 2012 research report.

"Asian Paints delivers strong performance with Q4FY12 performance beating expectations on all possible counts. Key highlights of Q4FY12 performance is (1) revenue grows 29.5% yoy to Rs25.4 bn (2) Ebidta grows 32.2% yoy to Rs3.8 bn (10% ahead of expectation) and (3) APAT grows 39.5% yoy to Rs2.6 bn (18% ahead of expectation). The volume growth delivery was significantly ahead of expectation, driving the overall performance in the quarter. Higher other income and stable depreciation (non-capitalization of Rohtak expansion), triggered significantly faster APAT growth."

"India’s decorative paints business grew 29% yoy to Rs20.6 bn, delivering strong performance. The underlying volume growth should be 14-15% yoy; significantly higher then last 3-quarters run-rate. Though, annual volume growth has seen moderation, but it volume growth still remains higher then expectations. Also, the concurrent value growth remains significantly ahead of expectations. Currently, there is visible divergence in consumption spends and paints demand in market place. However, we continue to raise our red flags on paints demand for forthcoming quarters."

"Asian Paints performance for FY12 remains ahead of expectations; beats our annual earnings forecasts by 4%. It reports Consol EPS of Rs103/Share against our forecasts of Rs99/Share. In the headline nos (1) revenue grew 25% yoy to Rs96.3 bn (being 2.5% ahead of expectation) (2) Ebidta grew 14% yoy to Rs15.8 bn (being 3.4% ahead of expectation) and (3) APAT grew 17% yoy to Rs9.9 bn (being 4% ahead of expectation). Domestic volume grew 12-13% in FY12 versus 17% in FY11 showing moderation, though not on expected lines."

"FY12 had robust and strong performance with (1) volume performance being above expectations and (2) margin pressure efficiently managed through price hikes - underlying challenges to business remains intact, far higher in face of current business environment. We revise earnings for FY13E by 7% to Rs120.9/Share and introduce FY14E earnings of Rs139.0/Share; it remains largely driven by improving base of FY12E. We retain our HOLD rating with target price of Rs 3340/Share," says Emkay Global Financial Services research report.

Institutional holding more than 40% 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

Read More