Asian Paints - 4QFY12 Results Update - Motilal Oswal

- Asian Paints 4QFY12 results are above estimates with Cons PAT of INR2.6b (est INR 2.3b).

- Domestic volume growth at ~18-19% as against an estimate of 14% indicating strong demand conditions despite frequent price increases. Sales increased 29%, EBIDTA increased by 32% as margins expanded by 40bp due to savings in staff costs and other expenses.

- Subsidiary sales were up 31% YoY with margins contracting by 30bp to 9.9% (not comparable due to transfer of APNT's industrial paints and powder coating business).

- APNT is gearing up for sustained growth in coming years; it has added capacity of 50,000kl in its Rohtak plant (200,000kl) with intent of doubling it in future. It will commission Khandala plant in Maharashtra with Phase 1 capacity of 300,000kl towards the end of FY13.

- We are increasing FY13 and FY14 estimates by 6-8% which factors in 1) sustained volume growth 2) higher realizations following 5.2% price increase in April and May and benefits of operating leverage. We believe APNT will continue to enjoy premium valuations due to strong growth visibility, high entry barriers and pricing power. The stock trades at 28.9x FY13E and 22.8x FY14E EPS. Buy with a target price of INR4,057 (25x FY14E).

Source : Equity Bulls

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