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RESULT UPDATE
Asian Paints (APNT IN, INR 2732, BUY)
Asian Paints’ Q3FY12 net sales surged 22% YoY to INR25.6bn (above our estimate). Key positives
were despite a slowdown being witnessed in discretionary products and the company taking
significant price hike to counter raw material pressure, the company was able to deliver a higher
than expected volume growth. Key negatives were steep rise in titanium dioxide (TiO2; ~20% of
total COGS) price led to 89bps COGS expansion, thereby contracting EBITDA margins by 91bps.
We will closely track volume growth as the economic recovery remains sluggish. We remain
positive over longer term. Maintain ‘BUY’.
Sales growth robust; PAT up 16.6% YoY despite input cost pressure
Q3FY12 consolidated net revenue grew 22% YoY to ~INR25.6 bn. PAT, at ~INR2.57bn, rose 16.6% YoY.
The company’s standalone business posted robust growth with revenue surging 20.3% YoY to
~INR21.09bn and paint business PBIT margins expanded 123bps despite a slowdown being witnessed
in the economy.
Gross margin dip marginally; price hike save the day
Due to raw material price index ballooning, the company’s gross margin contracted 89bps YoY. Input
prices (titanium dioxide and crude‐related inputs) increased considerably, denting margin but the
several round of price hikes saved further damage. In FY11 ~14% price hike was taken by Asian Paints
apart from ~8% price hike in H1FY12. The price hikes have impacted consumption to some extent but
the bigger dampener for slowdown in paint demand has been extended monsoons and sustained
inflationary pressure in the economy. We expect raw material pressure to continue as TiO2 price is
not expected to soften in the near term.
Outlook and valuations: Growing strong; maintain ‘BUY’
In spite of the challenging scenario in international and industrial segments, the company reported
strong numbers. The organized paint segment in domestic market is growing ahead of unorganized
segment with Asian Paints growing faster than peers. Impact of input price pressure and price hike
needs to be monitored closely. The conference call is scheduled on Monday – 23rd January, 2012 post
which, we will release a detailed report.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RESULT UPDATE
Asian Paints (APNT IN, INR 2732, BUY)
Asian Paints’ Q3FY12 net sales surged 22% YoY to INR25.6bn (above our estimate). Key positives
were despite a slowdown being witnessed in discretionary products and the company taking
significant price hike to counter raw material pressure, the company was able to deliver a higher
than expected volume growth. Key negatives were steep rise in titanium dioxide (TiO2; ~20% of
total COGS) price led to 89bps COGS expansion, thereby contracting EBITDA margins by 91bps.
We will closely track volume growth as the economic recovery remains sluggish. We remain
positive over longer term. Maintain ‘BUY’.
Sales growth robust; PAT up 16.6% YoY despite input cost pressure
Q3FY12 consolidated net revenue grew 22% YoY to ~INR25.6 bn. PAT, at ~INR2.57bn, rose 16.6% YoY.
The company’s standalone business posted robust growth with revenue surging 20.3% YoY to
~INR21.09bn and paint business PBIT margins expanded 123bps despite a slowdown being witnessed
in the economy.
Gross margin dip marginally; price hike save the day
Due to raw material price index ballooning, the company’s gross margin contracted 89bps YoY. Input
prices (titanium dioxide and crude‐related inputs) increased considerably, denting margin but the
several round of price hikes saved further damage. In FY11 ~14% price hike was taken by Asian Paints
apart from ~8% price hike in H1FY12. The price hikes have impacted consumption to some extent but
the bigger dampener for slowdown in paint demand has been extended monsoons and sustained
inflationary pressure in the economy. We expect raw material pressure to continue as TiO2 price is
not expected to soften in the near term.
Outlook and valuations: Growing strong; maintain ‘BUY’
In spite of the challenging scenario in international and industrial segments, the company reported
strong numbers. The organized paint segment in domestic market is growing ahead of unorganized
segment with Asian Paints growing faster than peers. Impact of input price pressure and price hike
needs to be monitored closely. The conference call is scheduled on Monday – 23rd January, 2012 post
which, we will release a detailed report.
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