Asian Paints (APNT IN) - Decent performance amidst challenging environment - CSEC Research

Decent performance amidst challenging environment

- Consolidated revenue grew 8.9% YoY (+1.4% QoQ) to INR 41.16bn. Domestic decorative business registered low double digit volume growth in 4QFY17. Company has taken a price increase of 5.68% (3% in March 2017 & 2.68% in May 2017). International business, barring Egypt reported a strong growth. Egypt operating performance was marred by depreciation of Egypt pound.

- Home improvement business grew by 18.3% YoY to INR 881.2mn aided by network expansion and product enhancement, while the segmental losses widen to INR 121.1mn from INR 101mn in 4QFY16.

- Owing to the increase in RM cost, gross profit margins fell by ~175bps YoY to 39.2%. EBITDA margin fell by ~108bps YoY to 16.12%; Employee expense fell by ~60bps YoY and other expenses fell by 10bps YoY. EBITDA grew by 2.1% YoY and -8.3% QoQ to INR 7.1bn.

Valuation: At CMP, stock is fairly priced and it is trading 47.6X/40.4X FY18E & FY19E earnings. We assign a target P/E of 38X on FY19E (+1SD 5yrs avg. 1yr forward P/E) to arrive at a target price of INR 1,068 and with a MARKETPERFORMER rating.

Risks: Adverse Raw material, currency movement, inability to pass on price increases, tapering off of volume growth.

Shares of ASIAN PAINTS LTD. was last trading in BSE at Rs.1132.3 as compared to the previous close of Rs. 1167.8. The total number of shares traded during the day was 1121732 in over 6570 trades.

The stock hit an intraday high of Rs. 1178.6 and intraday low of 1128.5. The net turnover during the day was Rs. 1273388019.

Source : Equity Bulls

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