Asian Paints - 3QFY13 results expectation - we expect modest revival in volume growth - Ambit

(APNT IN, mcap US$7.5bn, BUY, TP Rs4,618, 7% upside)

Analyst: Rakshit Ranjan, CFA, rakshitranjan@ambitcapital.com, Tel: +91 22 3043 3201

Our expectations from the results: We expect Asian Paints' volume growth to have revived to 9-10% in 3QFY13 vs 3-5% in 1HFY13. This revival is likely to have been a result of: (a) pent-up demand from delayed monsoons; (b) shift in Diwali sales from October to November; (c) a good wedding season during the quarter; and (d) market share gains from competitors. We do not expect the company to have taken any price increases during the quarter. Profit margins are likely to have benefited due to further premiumisation of the product mix and input costs being flat to down by 3-5% on a YoY basis.

Asian Paints is currently trading at 28x our FY14 EPS. Whilst this multiple is 21% higher than that of its closest peer, Berger Paints, we expect the premium rating against peers to be justified by the strength of its competitive advantages related to a more efficient supply chain and stronger brand recall. Our DCF-based target price is Rs4,618, 7% upside.

Source : Equity Bulls

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