Edelweiss' research report on Asian PaintsAsian Paints’ (APL) Q3FY16 numbers were strong with a line by line beat versus our estimates. Key positives include: (i) robust decorative volume growth at ~14% YoY (highest in past 7 quarters; 8% YoY in Q2FY16) aided by festive cheer, low base; (ii) gross margin catapulted (highest in past 11 years) 328bps YoY and 88bps QoQ aided by lagged impact of commodity price correction; and (iii) robust growth in industrial and international businesses. The only negative was impairment loss of INR 525mn taken in Sleek business (we continue to remain concerned on lack of pick up in Sleek). Raw material prices having cooled further, we do not rule out a price cut in the next 3 months; we anticipate this to be a proactive step from the leader to ward off competition from smaller players. APL is among our top picks and our faith remains. Maintain ‘BUY’.Outlook and valuations: Lustrous growth; maintain ‘BUY’APL remains key beneficiary of recovery in urban demand and GDP revival. In our view, volume growth and margin expansion need to sustain on a half yearly basis to avoid quarterly volatility. The stock is trading at 37.9x FY17E and 31.8x FY18E EPS. We maintain ‘BUY/Sector Outperformer’ with a target price of INR 990.For all recommendations, click here 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.
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