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Paints volume grow 15‐16%; cost pressures impact profitability: Asian Paints’
(APNT’s) Q4FY11 consolidated sales; EBITDA and PAT came in at Rs19.7bn (up
5% YoY), Rs2.9bn (up 8.5%) and Rs1.86bn (down 3% YoY) against our
expectations of Rs20.08bn, Rs3.3bn and Rs2.2bn, respectively. Reported
numbers are not comparable as base quarter includes six months performance
of international division. Like to like consolidated sales and PBT grew 24% and
2%, respectively. We estimate 15‐16% volume growth in decorative paints for
the quarter. For the full year, volume growth came in at 17% which is impressive
given the series of price hikes taken by APNT in FY11, amounting to 12.4%
(weighted average ~7.5% for FY11). Given the steep inflation in key RM costs,
APNT plans to hike prices again in May and June by 4.3% and 2.4%, respectively.
Performance of international division continued to remain weak owing to poor
demand in Caribbean and political disruptions in Middle East. (19% and 23%
revenue and EBIT decline, respectively)
Gross margins decline ~300bps YoY; RM price inflation 14% for FY11: Pressure
from rising input costs was reflected in ~300bps decline in gross margins despite
series of price hikes in the previous 6 months. Material Price index for Q4 moved
to 121.8 from 115 in Q3 (indicating ~22% increase in RM prices vs FY10 average)
with FY10 base as 100. Management expects the input cost pressure to
continue in the near term as incremental supply addition in Tio2 remains subpar.
Operating margins decline was restricted to 180bps owing to savings of
140bps in employee costs.
Maintain ‘BUY’: We have revised our estimates downward by 3‐5% for FY12e
and FY13e, to account for higher than estimated increase in raw material prices.
Volume growth has remained strong so far despite higher than average price
hikes. We roll forward our model to Mar‐13e and continue to maintain our
‘BUY’ rating on the stock, with one‐year price target of Rs3,000.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Paints volume grow 15‐16%; cost pressures impact profitability: Asian Paints’
(APNT’s) Q4FY11 consolidated sales; EBITDA and PAT came in at Rs19.7bn (up
5% YoY), Rs2.9bn (up 8.5%) and Rs1.86bn (down 3% YoY) against our
expectations of Rs20.08bn, Rs3.3bn and Rs2.2bn, respectively. Reported
numbers are not comparable as base quarter includes six months performance
of international division. Like to like consolidated sales and PBT grew 24% and
2%, respectively. We estimate 15‐16% volume growth in decorative paints for
the quarter. For the full year, volume growth came in at 17% which is impressive
given the series of price hikes taken by APNT in FY11, amounting to 12.4%
(weighted average ~7.5% for FY11). Given the steep inflation in key RM costs,
APNT plans to hike prices again in May and June by 4.3% and 2.4%, respectively.
Performance of international division continued to remain weak owing to poor
demand in Caribbean and political disruptions in Middle East. (19% and 23%
revenue and EBIT decline, respectively)
Gross margins decline ~300bps YoY; RM price inflation 14% for FY11: Pressure
from rising input costs was reflected in ~300bps decline in gross margins despite
series of price hikes in the previous 6 months. Material Price index for Q4 moved
to 121.8 from 115 in Q3 (indicating ~22% increase in RM prices vs FY10 average)
with FY10 base as 100. Management expects the input cost pressure to
continue in the near term as incremental supply addition in Tio2 remains subpar.
Operating margins decline was restricted to 180bps owing to savings of
140bps in employee costs.
Maintain ‘BUY’: We have revised our estimates downward by 3‐5% for FY12e
and FY13e, to account for higher than estimated increase in raw material prices.
Volume growth has remained strong so far despite higher than average price
hikes. We roll forward our model to Mar‐13e and continue to maintain our
‘BUY’ rating on the stock, with one‐year price target of Rs3,000.
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