Asian Paints - Q1 FY22 results and investor call takeaways - YES Securities

(Rating: NOT RATED)

Growth momentum continues unabated, RM inflation and valuation possible headwinds

- View - In line with our view, the stock has seen a strong outperformance and is now trading at all-time high valuation multiple of 68x FY23 and 59x FY24 consensus earnings. While the strong demand outlook in the near-term and pricing actions driving margin recovery can help sustain premium valuations, there is limited room for positive surprises from here. Further rise in material inflation and margin/ROCE dilution due to diversification could be risks to an otherwise flawless execution story. Given limited absolute upside, we don't recommend aggressive buying at current levels.

- Strong double-digit volume growth on 2/3 yr-CAGR basis despite May weakness - Continued momentum from last quarter witnessed in April, May impacted by second wave, strong uptick again in June driving strong volume growth trends; 1Q saw decorative volume growth of 106% yoy, 2-yr CAGR of 12.7% and 3-yr CAGR of 14%, decorative value growth of 95% yoy, 2-yr CAGR of 4.5% and 3-yr CAGR of 8.8%.

- Results summary - Revenue/EBITDA/PAT growth of 91%/89%/161% yoy on a small base, EBITDA margins at 16.4%, down only 20bps yoy led by strong cost controls and operating leverage; Gross margins down sharply by 600bps in 1Q; after 8-10% material inflation in 4QFY21, another 13-15% inflation in 1Q; 3% price increase taken in 1Q, 1% in July and further increases being planned dependent upon currency and RM price movement

Shares of ASIAN PAINTS LTD. was last trading in BSE at Rs. 3159.2 as compared to the previous close of Rs. 2979.35. The total number of shares traded during the day was 261867 in over 20361 trades.

The stock hit an intraday high of Rs. 3178 and intraday low of 2981.7. The net turnover during the day was Rs. 806255616.

Source : Equity Bulls

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