Asian Paints ::Emkay: Top Sells

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

TP : Rs3,026
Investment Rationale
§ While domestic paints growth has shown resilience, pace of growth has seen moderation, on the expected lines,
to 14% for 1QFY12 against 17% for FY11. We believe that, being a discretionary product, demand velocity would
be impacted; domestic business would register volume growth of 1.9X GDP in FY12E and FY13E.
§ Implemented 4.4% price hike in May, 2.5% in June and 1.3% in July – however, corresponding increase in raw
material index is 14%
§ Expect raw material pressure to continue… titanium dioxide prices have increased by 40% YTD. This is likely to
remain a key concern and will keep margins under check in future – Expect EBITDA margin to trail cost inflation
and hence, see 60 bps contraction in operating margins during FY12E.
§ Moreover, the company’s international and industrial paints segments, with higher price elasticity, are likely to
report a muted performance in future considering the weak business environment.
Valuations
§ Asian Paints is trading at rich valuations of 26x FY13E earnings. The upside is capped and current valuations do
not provide room for negative surprise.
§ Considering, risk to earnings estimates from lower volume growth and continuing high input cost, we maintain
HOLD rating with target price of Rs 3,026/share.

For full list click link below:

Emkay: Top Buys and Sells