Visit http://indiaer.blogspot.com/ for complete details �� ��
Asian Paints (ASPN.BO)
Buy: 2QFY11 Misses Expectations; Positive Thesis Intact
Results disappoint, but outlook remains healthy — Revenue growth of ~5% Y/Y
to Rs18.1bn was ~20% short of our estimates. After 6 consecutive quarters of
15%+ revenue growth, 2QFY11 was impacted by a) the prolonged monsoon, b)
timing mismatch of the festive season and c) some pre-buy in 1QFY11 before the
price increases on July 1. EBITDA margins declined 40bps Y/Y to 18.3%,
impacting recurring PAT growth (~5% Y/Y to ~Rs2.3bn v/s. est. of Rs2.7bn).
would impact GMs on last year’s high base, we believe this will be mitigated by: a)
pricing - mgmt notes that recent price hikes (~8% wt avg increase in 1HFY11)
have been comfortably absorbed; b) Improving mix (in favor of emulsions, ~40%
of revenues) should support revenue growth / margins; and c) Directionally,
appreciating rupee should also help profit growth (~25% of inputs are imported).
International business has mixed trends — 1H Revenues declined 3% Y/Y –
adjusting for forex impact business growth was +2% Y/Y. South Asia and Egypt
remain strong, but macro environment in the Gulf and Caribbean are key drivers
of medium term profitability.
Capex to continue - Planning for the future — Mgmt guides to ~Rs2.5bn capex in
FY11E, including Rs1bn for the new Khandala plant. This would be the largest
facility with 300K KL capacity in phase 1 with est. capex of ~Rs10bn by FY13E.
Reiterate Buy; Increasing target price to Rs2903 — We remain positive on the
demand outlook. Mgmt noted that October has been strong and encouragingly,
there has been sequential pick up in the automotive segment too. Our TP is based
on 25x Mar 12E (roll forward from 25x Dec11E). Our multiple is at ~25% premium
to ASPN’s average trailing multiple of the past 5 years, justified given the strong
revenue and EPS growth trajectory (~20% CAGR over FY10-12E). ASPN is one of
our preferred picks in the Indian consumer universe.
No comments:
Post a Comment