Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asian Paints Ltd.
R aw material pressure to remain, Sell
�� Event: good Q1 results; volume outlook robust
We raise our estimates for Asian Paints (APL) on good Q1FY12 results, and a
positive business outlook. Our thesis on slowing discretionary consumption in
times of inflation (outlined in our report, Asian Paints Ltd: Raw material cost
pressures to hurt margins, published on 29 March 2011) which assumed APL’s
volume growth would slow, has proved incorrect. APL demonstrated ~13%
volume growth underlying ~29% YoY growth in domestic revenue in Q1FY12.
�� Impact: increased estimates to incorporate price increases
We raise our estimates for APL to incorporate: 1) additional price increases to be
taken by APL (an estimated 5% increase for the rest of the year); and 2) our
marginally higher volume estimates for APL to incorporate higher demand than
expected earlier. We raise our EPS estimates for FY12/FY13 from
Rs102.6/Rs121.5 to Rs109.0/Rs133.7.
�� Action: raw material pressure to continue
We believe that the raw material pressure for Asian Paints will continue with TiO2
prices not showing any signs of declining. A ~16% increase in prices by Dupont
will only add to the raw material pressure for Asian Paints. Though there has been
a moderation in the rate of increase of raw material prices, we believe they will still
remain high with Asian Paints being forced to take further price increases.
�� Valuation: maintain Sell rating, raise price target to Rs2,750
We maintain our Sell rating and increase our price target from Rs2,500 to Rs2,750
on our higher estimates. We derive our price target from a DCF-based
methodology and explicitly forecast long-term valuation drivers using UBS’s
VCAM tool. We assume a WACC of 10.4%.
�� Asian Paints Ltd.
Asian Paints is the leading paint manufacturer in India with a 45% share of the
organised sector paint market. It ranks among the top 10 decorative coatings
companies in the world. Asian Paints operates in 20 countries across the world.
International business accounts for 17% of sales. Decorative paints accounted
for around 80% of the group's sales in FY08.
�� Statement of Risk
Asian Paints is the leading paint manufacturer in India with a ~60% share of the
organised decoratives paint market. It ranks among the top 10 decorative
coatings companies in the world. Asian Paints operates in 20 countries across
the world. International business accounts for ~13-14% of sales. Decorative
paints accounted for around 80% of the group's sales in FY11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asian Paints Ltd.
R aw material pressure to remain, Sell
�� Event: good Q1 results; volume outlook robust
We raise our estimates for Asian Paints (APL) on good Q1FY12 results, and a
positive business outlook. Our thesis on slowing discretionary consumption in
times of inflation (outlined in our report, Asian Paints Ltd: Raw material cost
pressures to hurt margins, published on 29 March 2011) which assumed APL’s
volume growth would slow, has proved incorrect. APL demonstrated ~13%
volume growth underlying ~29% YoY growth in domestic revenue in Q1FY12.
�� Impact: increased estimates to incorporate price increases
We raise our estimates for APL to incorporate: 1) additional price increases to be
taken by APL (an estimated 5% increase for the rest of the year); and 2) our
marginally higher volume estimates for APL to incorporate higher demand than
expected earlier. We raise our EPS estimates for FY12/FY13 from
Rs102.6/Rs121.5 to Rs109.0/Rs133.7.
�� Action: raw material pressure to continue
We believe that the raw material pressure for Asian Paints will continue with TiO2
prices not showing any signs of declining. A ~16% increase in prices by Dupont
will only add to the raw material pressure for Asian Paints. Though there has been
a moderation in the rate of increase of raw material prices, we believe they will still
remain high with Asian Paints being forced to take further price increases.
�� Valuation: maintain Sell rating, raise price target to Rs2,750
We maintain our Sell rating and increase our price target from Rs2,500 to Rs2,750
on our higher estimates. We derive our price target from a DCF-based
methodology and explicitly forecast long-term valuation drivers using UBS’s
VCAM tool. We assume a WACC of 10.4%.
�� Asian Paints Ltd.
Asian Paints is the leading paint manufacturer in India with a 45% share of the
organised sector paint market. It ranks among the top 10 decorative coatings
companies in the world. Asian Paints operates in 20 countries across the world.
International business accounts for 17% of sales. Decorative paints accounted
for around 80% of the group's sales in FY08.
�� Statement of Risk
Asian Paints is the leading paint manufacturer in India with a ~60% share of the
organised decoratives paint market. It ranks among the top 10 decorative
coatings companies in the world. Asian Paints operates in 20 countries across
the world. International business accounts for ~13-14% of sales. Decorative
paints accounted for around 80% of the group's sales in FY11.
No comments:
Post a Comment