Asian Paints - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Asian Paints (APL) posted a below-than estimated performance due to a disappointing show on the volume front, which declined marginally by ~1-2%. on a yoy basis. OPM remained flat at 17.2%. Net profit grew by 9.4% yoy to Rs.288cr. We maintain our Neutral view on the stock.

Key highlights of the quarter: For 1QFY2013, APL registered a 12.5% yoy growth in its consolidated topline to Rs.2,539cr. On a stand-alone basis, the revenue, (adjusted for demerger of industrial coating business in June 2011) rose by ~11%, indicating a ~1-2% decline in the domestic volumes). The decline in volumes comes after 12 consecutive quarters of volume growth. OPM stood flat yoy at 17.2%, even though there was a 154bp yoy improvement in the gross margin largely due to price increases. The cumulative price increase for FY2012 stood at 12.28%. The company had taken further price hikes of 2.1% and 3.2% w.e.f. from March 29, 2012 and May 1, 2012, respectively.

Outlook and valuation: APL is currently facing problem of demand slowdown in the domestic market. However, the company has managed to maintain its growth due to price hikes. Going ahead, we believe it would be challenging for the company to carry out further price hikes without compromising on volume growth. At the CMP, the stock is trading richly at 24.4x FY2014E. Hence, we maintain our Neutral view on the stock.

Source : Equity Bulls

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