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AP's 1QFY11 29% revenue and 18.7% EBITDA growth was ahead of our expectations. EBITDA
margin expansion by 280bp qoq was partly driven by price hikes (8% in 1QFY12), and lower
other expenditure to net sales. Management has hinted at some slowdown in demand in June.
1QFY12 revenues ahead of expectations
Despite the high base of 1QFY11, when the company achieved sales growth of 28%, AP
recorded revenue growth of 28.9%. This growth has been better than our expectation of 21%
revenue growth.
It may be recalled that AP increased prices 11-12% in FY11, and has followed it up with an
8% hike in 1QFY12. The hikes in 1QFY11, were 4% in May 2011, 2% on 1 June 2011, and
2% at the end of June 2011. So clearly, the hikes were not fully reflected in 1QFY12.
We expect the volume growth of 13-14% in the domestic paints business.
EBITDA margins recover from 4QFY11 lows
AP's EBITDA margins slipped to 15.8% in 4QFY11, when the raw material cost to net sales
rose to 59% of net sales. Despite the raw material cost to net sales rising further to 59.8% in
1QFY12, the EBITDA margin improved 280bp as other expenditure to net sales dropped
sharply to 17% from 20.8% in 4QFY11 ( 19.5% in FY11).
We await clarification from management on the sustainability of the drop in other expenditure
in 1QFY12.
Strong start to the year, unless June slowdown escalates
AP has achieved an EPS of Rs26.11/ in 1QFY12, compared to our FY12 EPS estimates at
Rs103.4. Our estimates are shade lower than consensus estimates of Rs106.5/share. The
better-than-expected EBITDA margins in 1QFY12 at 18.8% as compared to FY11 actuals of
18.1% would, we believe, lead of upgrades to consensus earnings.
Paint demand has been robust with a volume growth of 15% through FY11 despite a 11-12%
price hike. In 1QFY12, the company has raised prices further by 8% to counter inflationary
pressures due to rising raw material costs.
Management has indicated that 1QFY12 paint demand has been strong on an All India basis,
but has highlighted a late slowdown in the quarter, probably an impact of the 20% price hike
effected over the last 15 months.
\
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
AP's 1QFY11 29% revenue and 18.7% EBITDA growth was ahead of our expectations. EBITDA
margin expansion by 280bp qoq was partly driven by price hikes (8% in 1QFY12), and lower
other expenditure to net sales. Management has hinted at some slowdown in demand in June.
1QFY12 revenues ahead of expectations
Despite the high base of 1QFY11, when the company achieved sales growth of 28%, AP
recorded revenue growth of 28.9%. This growth has been better than our expectation of 21%
revenue growth.
It may be recalled that AP increased prices 11-12% in FY11, and has followed it up with an
8% hike in 1QFY12. The hikes in 1QFY11, were 4% in May 2011, 2% on 1 June 2011, and
2% at the end of June 2011. So clearly, the hikes were not fully reflected in 1QFY12.
We expect the volume growth of 13-14% in the domestic paints business.
EBITDA margins recover from 4QFY11 lows
AP's EBITDA margins slipped to 15.8% in 4QFY11, when the raw material cost to net sales
rose to 59% of net sales. Despite the raw material cost to net sales rising further to 59.8% in
1QFY12, the EBITDA margin improved 280bp as other expenditure to net sales dropped
sharply to 17% from 20.8% in 4QFY11 ( 19.5% in FY11).
We await clarification from management on the sustainability of the drop in other expenditure
in 1QFY12.
Strong start to the year, unless June slowdown escalates
AP has achieved an EPS of Rs26.11/ in 1QFY12, compared to our FY12 EPS estimates at
Rs103.4. Our estimates are shade lower than consensus estimates of Rs106.5/share. The
better-than-expected EBITDA margins in 1QFY12 at 18.8% as compared to FY11 actuals of
18.1% would, we believe, lead of upgrades to consensus earnings.
Paint demand has been robust with a volume growth of 15% through FY11 despite a 11-12%
price hike. In 1QFY12, the company has raised prices further by 8% to counter inflationary
pressures due to rising raw material costs.
Management has indicated that 1QFY12 paint demand has been strong on an All India basis,
but has highlighted a late slowdown in the quarter, probably an impact of the 20% price hike
effected over the last 15 months.
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