Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Asian Paints Ltd - Q2FY21 Result Update - YES Securities

Posted On: 2020-10-22 22:29:11


2QFY21 investor call takeaways

Results summary - Revenue up 6% to Rs 53.5bn led by double-digit volume growth in decorative paints, GMs up 200bps to 44.4%, EBITDA margins up 470bps to 23.6% given savings in other expenses and PBT up 36% to Rs 11.3bn. Paints grew 6% with segment margins improving from 19% to 25% while home improvement declined 3% with losses reducing from 13% to 4%.

View - The stock is currently trading at 51x FY23E earnings. While the stock is trading near peak multiples, we can see it sustaining at these levels given improving growth visibility and strong market share gains coupled with a sustainably higher level of margins. Strong cash accretion can drive a combination of higher dealer support, strong distribution penetration in new markets and products, higher dividends and inorganic growth. Entry into home décor would be viewed with skepticism given the not so good experience with the kitchens and bath business in the past.

Presentation highlights

- Market conditions - Progressive recovery in demand led by unlocking of economy; supply side concerns also easing incrementally; pent-up demand helped during 2Q; input prices and currency remained favorable.

- Decorative business - Growth led by Tier 2/3/4 markets; 11% volume and 6% value growth in 2Q with improvement in every month of quarter; better recovery in economy range; strong response to at-home services; ; GMs supported by stable input prices and sourcing efficiencies.

- Entry into home décor - 1500 SKUs launched in lightings, furniture and furnishing range to provide complete Home Décor solutions.

- Innovations - launched anti-bacterial multi-surface paint range, sanitizers, disinfectants, masks, PPE kits.

- International business - Strong volume growth in Africa and Middle East, double-digit in Sri Lanka and Bangladesh, Nepal weak; revenue up 8% and PBT 44% in 2Q.

- Industrial business - Recovery in autos drove good growth in OEM business, refinish business still slow; gradual recovery in powder business, industrial liquid paint still slow; margins improved.

- Home Improvement - Kitchen business was flat witnessing strong recovery, PBT Loss of 4.4cr vs 13.5cr loss yoy; Bath business down 4% led by recovery in economy range, achieved EBITDA break-even vs 7.4cr loss.

- Outlook - Still uncertain if demand will sustain beyond festive season; good monsoon could support rural demand; no worries currently on input costs and currency; continue cost optimization measures due to uncertainties.

Q&A highlights

- Why enter into other home décor categories - Have vision of becoming a comprehensive home décor player and will leverage the strong service and store network and capture higher consumer wallet share by selling furniture, furnishings and lighting; will also help accelerate the struggling bath and kitchen business ; large unorganized market and lack of a strong national brand should help; no capex as of now as supply outsourced.

- India volumes - Focus on undercoats and waterproofing market drove domestic volumes in addition to putty.

- Sustainability of cost savings - Cut back on rentals, travel and G&A; aim to retain a major chunk of those savings.

- Demand momentum in October - Demand has seen strong spurt even in October due to festive season; second wave of COVID remains a big risk.

- Sales mix - Product mix was strong; but category mix within products relatively inferior which resulted in lower realizations.

- Regional demand trends - Demand in metros and Tier 1 markets still sluggish around 70-80% of normal levels; North and East regions doing better.

- Volume-value gap and market share - 5% gap should come off only marginally given the company's current product focus; gaining share from both unorganized and organized players in Tier 3,4 markets.

- Dealer Health - Have supported dealers adequately with regards to demand creation, customer innovation and higher dealer margins; provided quick financial settlements, insurance, higher credit.

- 2H demand outlook - 2H can be better than current growth rate especially if larger cities see recovery and COVID situation normalizes; do not see a need for price cuts.

- Margin outlook - Most efficiency improvements and cost controls should sustain; sharp rise in crude or currency remains a risk to margins.

Link to the Report

Shares of ASIAN PAINTS LTD. was last trading in BSE at Rs.2100.25 as compared to the previous close of Rs. 2114.35. The total number of shares traded during the day was 66138 in over 5903 trades.

The stock hit an intraday high of Rs. 2114.95 and intraday low of 2078. The net turnover during the day was Rs. 138467400.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com



Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Motherson Sumi Systems - Company Update - Virtual Investor Conference - ICICI Direct

Mutual Fund Review - November, 2020 - ICICI Direct

Sadbhav Engineering - Q2FY21 Company Update - ICICI Direct

IRB Infrastructure - Q2FY21 Company Update - ICICI Direct

Vodafone Idea fund raising - Angel Broking

Rupee - Nov 23, 2020 - Reliance Securities

Crude Oil - Nov 23, 2020 - Reliance Securities

Q2FY21 Bank Result Quick Review - Angel Broking

Banks & NBFC's Sector Update Report - Yet another watershed moment? - HDFC Securities

Galaxy Surfactants - EBITDA/kg has an upside risk - ICICI Securities

Diagnostics - COVID-19 tests continue to trend higher - ICICI Securities

Banking & Financial Services - Sector Update - Nov 22, 2020 - ICICI Direct

Dalmia Bharat Sugar - Q2FY21 Company Update - ICICI Direct

Balkrishna Industries - Industry export growth momentum continues - ICICI Securities

Covid Recovery Pulse - Festive positivity continues in auto retails, E-way bill generation improves... - ICICI Direct

Quant Pick - Exide Industries - ICICI Direct

Shankara Building Products - Q2FY21 Company Update - ICICI Direct

Triveni Engineering - Q2FY21 Company Update - ICICI Direct

Initiating Coverage on Sudarshan Chemical - Leaping into the league of giants - HDFC Securities

Earnings Wrap Q2FY21: Earnings outperform, post Covid recovery picks up steam - ICICI Direct

Vodafone Idea Positive development beneficial for IDFC first bank - Angel Broking

Lakshmi Vilas Bank - Angel Broking

WIPRO Buyback record date announcement - Angel Broking

TCS buyback record date announcement - Angel Broking

Banks Sector Update - Collection efficiency - a positive surprise! - HDFC Securities

Quant Pick - Max Financial Services - ICICI Direct

Graphite India - Q2FY21 Result Update - ICICI Direct

Gladiator Stocks - Maruti Suzuki India - ICICI Direct

Exide Industries - Q2FY21 Result Update - ICICI Direct

Mishra Dhatu Nigam - Execution outlook remains strong - ICICI Securities

Bharat Electronics - Diversifying into multiple revenue streams - ICICI Securities

Wipro Ltd - Virtual Analyst Meet Update - ICICI Direct

Avadh Sugar & Energy - November 2020 - Company Update - ICICI Direct

Mahindra Lifespace Developers - H1FY21 Company Update - ICICI Direct

Quant Pick - Godrej Consumer Products - ICICI Direct

India Equity Strategy Report - Quarterly flipbook - HDFC Securities

Maintain REDUCE on Jubilant FoodWorks - Recovery continues; priced-in - HDFC Securities

Maintain BUY on Ahluwalia Contracts - Q2FY21 - Significant beat on execution - HDFC Securities

Repco Home Finance Limited - Q2 FY21 Result Update - YES Securities

JK Lakshmi Cement - Target upgrade - Angel Broking

BUY on Petronet LNG - Stellar quarter - HDFC Securities

Maintain BUY on Prestige Estates Projects - Capex cycle to gather pace - HDFC Securities

REDUCE on LIC Housing Finance - Tread with caution - HDFC Securities

SELL on New India Assurance - High claims ratio dents profits - HDFC Securities

New orders for L&T - Angel Broking

Cipla - Multi-G agreement - Angel Broing

REDUCE on Eicher Motors - 'Meteor' to drive sales; valuations remain expensive - HDFC Securities

BUY on Galaxy Surfactants - Highest volumes in a quarter - HDFC Securities

Repco Home Finanance - Q2FY21 Result - Angel Broking

NMDC - A single headwind against investment thesis - II - ICICI Securities



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019