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Last Updated : Feb 01, 2017 02:24 PM IST | Source: Moneycontrol.com

Hold Asian Paints; target of Rs 920: Axis Direct

Axis Direct recommended hold rating on Asian Paints with a target price of Rs 920 in its research report dated January 31, 2017.

 
 
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Axis Direct's research report on Asian Paints


Consolidated sales grew 3% with 3% volume growth in India decorative. Gross margin improvement slowed to 70bps (from >200bps improvement for the past eight quarters) due to rising pressure from higher crude prices.EBITDA declined 1% YoY as EBITDA margin declined 70bps YoY to 20%. Translation loss from Egyptian subsidiary and higher tax rate (up 380bps) led to 11% adj. PAT decline.


Outlook
We see volumes recovering in FY18 but expect marginpressure given rising commodity prices. India decorative margin at >20% is at an all-time high. We reduce FY17/ 18 EPS by 8%/ 11%. However, given the 17% correction in the stock in past three months, we upgrade to HOLD with revised TP of Rs 920, based on 35x forwardP/E (Rs 980 earlier).

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First Published on Feb 1, 2017 02:24 pm
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