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No sign of a meaningful pick-up yet; maintain Neutral
While 5-6% volume growth in Q2FY13 surprised the Street and us
positively, it remains well below the company’s historical long-term (fiveyear)
average. While we expect a sequential pick-up in volume growth in
Q3, part of this should be driven by the timing of the festive season, while
underlying volume growth is likely to remain modest. Given that the stock
is currently trading at 28.4x FY14F earnings and with uncertainty of any
triggers for consensus earnings estimate hikes in the near term, we
maintain our Neutral rating. We hike our TP to INR3,800 as we roll
forward, with no changes to our earnings estimates or multiples.
Catalyst: Strong festive season demand and a fall in input prices
We see two possible catalysts: 1) a strong pick-up in volume growth
driven by the festive season; and 2) a fall in commodity costs. However,
we believe both these potential catalysts lack meaningful traction in the
near term, which means that a hike in consensus earnings estimates is
unlikely.
Valuation: APNT trades at 28.4x FY14F, in line with sector average
We estimate that APNT will report ~20% earnings growth in FY14-15F.
Given the slowdown in discretionary spend, we do not see an upside risk
to its earnings in the near term. After the recent share price run (APNT up
+8% vs. BSE FMCG index up +7% since August 31, 2012), the stock
currently trades at 28.4x FY14F earnings, in line with the sector market
cap-weighted average of 27.6x. We hike our TP as we roll forward but
retain our earnings estimates. We believe that the stock is fairly valued at
current levels.
No sign of a meaningful pick-up yet; maintain Neutral
While 5-6% volume growth in Q2FY13 surprised the Street and us
positively, it remains well below the company’s historical long-term (fiveyear)
average. While we expect a sequential pick-up in volume growth in
Q3, part of this should be driven by the timing of the festive season, while
underlying volume growth is likely to remain modest. Given that the stock
is currently trading at 28.4x FY14F earnings and with uncertainty of any
triggers for consensus earnings estimate hikes in the near term, we
maintain our Neutral rating. We hike our TP to INR3,800 as we roll
forward, with no changes to our earnings estimates or multiples.
Catalyst: Strong festive season demand and a fall in input prices
We see two possible catalysts: 1) a strong pick-up in volume growth
driven by the festive season; and 2) a fall in commodity costs. However,
we believe both these potential catalysts lack meaningful traction in the
near term, which means that a hike in consensus earnings estimates is
unlikely.
Valuation: APNT trades at 28.4x FY14F, in line with sector average
We estimate that APNT will report ~20% earnings growth in FY14-15F.
Given the slowdown in discretionary spend, we do not see an upside risk
to its earnings in the near term. After the recent share price run (APNT up
+8% vs. BSE FMCG index up +7% since August 31, 2012), the stock
currently trades at 28.4x FY14F earnings, in line with the sector market
cap-weighted average of 27.6x. We hike our TP as we roll forward but
retain our earnings estimates. We believe that the stock is fairly valued at
current levels.
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