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Asian Paints – Margins come under pressure
Asian Paints 3QFY11 margins fell 320bps yoy, and 240bp qoq, while its revenue growth at 37%
yoy was better than expected. So far, AP has achieved 72% of our FY11 EPS estimates, with an
EBITDA margin of 18.9% (vs our estimate of 18.8% for FY11).
3QFY11 results in line with our expectations
As compared to our PAT expectations of Rs2.09bn, AP achieved a PAT of Rs2.07bn;
however, the margins were lower than our expectations. AP raw material cost to net sales
rose to 59.5%, the highest level in the last six quarters, driven by higher prices of crude oil
based raw materials, and rising titanium di-oxide prices. The underlying EBITDA growth at
16% was broadly in line with our expectations as sales growth was higher than expected.
PAT growth at 15.6% was also broadly in-line with our expectations. On a consolidated basis,
the PAT was 6.2% higher than standalone profits at Rs2.2bn.
Is the 37% net sales growth sustainable?
The festival season is key painting season in India, and tends to fall either in 2Q or 3Q in a
year. While in FY10, the festival season fell in 2Q, the same in FY11 was in 3Q. As a result
the sales growth at 37% looks very high, but combining the sales of 2Q and 3Q of the
respective years, the underlying sales growth is at 23%. AP in FY11 so far has achieved
sales growth of 23.1%, which is better than our FY11 estimate of 19%.
We will review numbers after management contact
AP management is scheduled to speak to investors later today, but the company has already
achieved 72% of our FY11F EPS. The EBITDA margin for FY11 so far has been 18.9%, as
compared to FY11 estimate of 18.8%. AP continues to outperform its organised sector peers
in terms of growth, and the macro environment so far has been strong for the decorative
paints business. Given the growing inflationary pressure in the economy, and a possible
lagged impact on depending, we would be cautious in raising our sales growth estimates of
18% for the next two years.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Asian Paints – Margins come under pressure
Asian Paints 3QFY11 margins fell 320bps yoy, and 240bp qoq, while its revenue growth at 37%
yoy was better than expected. So far, AP has achieved 72% of our FY11 EPS estimates, with an
EBITDA margin of 18.9% (vs our estimate of 18.8% for FY11).
3QFY11 results in line with our expectations
As compared to our PAT expectations of Rs2.09bn, AP achieved a PAT of Rs2.07bn;
however, the margins were lower than our expectations. AP raw material cost to net sales
rose to 59.5%, the highest level in the last six quarters, driven by higher prices of crude oil
based raw materials, and rising titanium di-oxide prices. The underlying EBITDA growth at
16% was broadly in line with our expectations as sales growth was higher than expected.
PAT growth at 15.6% was also broadly in-line with our expectations. On a consolidated basis,
the PAT was 6.2% higher than standalone profits at Rs2.2bn.
Is the 37% net sales growth sustainable?
The festival season is key painting season in India, and tends to fall either in 2Q or 3Q in a
year. While in FY10, the festival season fell in 2Q, the same in FY11 was in 3Q. As a result
the sales growth at 37% looks very high, but combining the sales of 2Q and 3Q of the
respective years, the underlying sales growth is at 23%. AP in FY11 so far has achieved
sales growth of 23.1%, which is better than our FY11 estimate of 19%.
We will review numbers after management contact
AP management is scheduled to speak to investors later today, but the company has already
achieved 72% of our FY11F EPS. The EBITDA margin for FY11 so far has been 18.9%, as
compared to FY11 estimate of 18.8%. AP continues to outperform its organised sector peers
in terms of growth, and the macro environment so far has been strong for the decorative
paints business. Given the growing inflationary pressure in the economy, and a possible
lagged impact on depending, we would be cautious in raising our sales growth estimates of
18% for the next two years.
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