Asian Paints - Q1FY14 Result Update - Nirmal Bang

- The company posted below results compared to the street expectation.

- Consolidated Sales came in at Rs 2818.3 crs (up by 11% YoY and by 3.9% QoQ). The net sales registered a growth in early double digit as Industrial paints segment continues to be impacted due to economic slowdown. Automotive coatings growth was affected due to subdued demand in the auto sector. International Business has recorded a good performance.

- EBITDA was Rs 464.7 crs (up by meager 4.1% YoY and by 18.2% QoQ). Operating margins, was down by 110bps YoY to 16.5% and up by 200bps QoQ. The jump in Other expenditure and employee expenses as a % of sales impacted the EBITDA and the margin for the company.

- Raw material prices have started to ease, which is reflected in the improved gross margin by 110bps on a YoY basis to 42.7% and flat in QoQ.

- The Adj PAT stood at Rs. 275.2 crs (down by 4.6% YoY and was up by 9.6% QoQ). PAT margin stood at 9.8% in Q1FY14 as compared to 11.4% in Q1FY13 and 9.3% in Q4FY13. The decline in profitability of the company is attributed to the increase in tax rate and depreciation cost though the respite was seen in the decline in the interest cost by 21.3% YoY and jump in Other income by 15.8% YoY.

- The stock is trading at 44.7x trailing basis, which is costly in our view.

Source : Equity Bulls

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