Asian Paints:-
“Asian Paints’ Q1FY13 consolidated revenues at Rs 2,539.3 crore, grew by
12.3% yoy, largely led by price hikes and favorable product mix;
however volumes declined by 2% yoy. The decline in volume can also be
attributed to the effect of high base in both Q1FY12 and Q4FY12 due to
dealer stocking ahead of price hikes in addition to slowdown in GDP. The
management admitted that volume decline was much below their
expectation. Both, the urban demand and rural demand grew at a similar
pace. Despite the negative volume surprise, management remains confident
of demand reviving as the retailer and dealer feedback regards future
expectations remains optimistic However, we are circumspect about their
optimism and maintain a cautious stance. On a standalone basis, the net
sales grew by a mere 6.7% yoy in value terms to Rs 2,035 crore while the
EBITDA grew by 12.2% yoy despite a 6% rise in material index on the
back of favourable product mix. The gross margins expanded by 315 bps
yoy. The company continues to see a favourable shift towards premium
segment from the lower end supported by favourable consumer
demographics.”
“EBITDA margins for the quarter stood at 17.5%, up 20 bps and 250 bps on yoy and qoq basis. Raw Material costs stood lower by 160 bps to 55.9%. However, increase in other expenses by 100 bps yoy and that of personnel expenses by 40 bps yoy lead to the growth in margins. The material prices have increased by 6.0% over the last year, however better contribution from higher margins products and price hikes have helped the company arrest the decline in margins. Despite increase in depreciation costs, lower other income, and forex losses, lower interest expenses help the company arrest the fall in net profit margins. The net profit margins for Q1FY13 stood at 11.7%, down 30 bps yoy. The net profit grew by 10.1% yoy to Rs 298.9 crore. The net profit adjusted for minority interest stood at Rs 288.4 crore. The company has given guidance of Rs 750 crore capex for FY13E, which includes Rs 500 crore to be spent on the Khandala plant in Maharashtra.”
“EBITDA margins for the quarter stood at 17.5%, up 20 bps and 250 bps on yoy and qoq basis. Raw Material costs stood lower by 160 bps to 55.9%. However, increase in other expenses by 100 bps yoy and that of personnel expenses by 40 bps yoy lead to the growth in margins. The material prices have increased by 6.0% over the last year, however better contribution from higher margins products and price hikes have helped the company arrest the decline in margins. Despite increase in depreciation costs, lower other income, and forex losses, lower interest expenses help the company arrest the fall in net profit margins. The net profit margins for Q1FY13 stood at 11.7%, down 30 bps yoy. The net profit grew by 10.1% yoy to Rs 298.9 crore. The net profit adjusted for minority interest stood at Rs 288.4 crore. The company has given guidance of Rs 750 crore capex for FY13E, which includes Rs 500 crore to be spent on the Khandala plant in Maharashtra.”
“Slowdown in GDP growth, high inflation scenario, weak monsoons and
drying up of investment cycle coupled with political inaction on account
of coalition politics can lead to the likely fall apart of the Indian
consumption story in the near term. Asian Paints, a play in the
consumption story and changing consumer preferences, in all respect is
likely to be affected by this. Early signs of volume growth falling and
dwindling rural growth might indicate weak growth in volume in the near
term. Further, volatile crude prices, depreciating rupee and inability
to pass on further price hikes would keep margins under pressure. At the
CMP of Rs 3,564, Asian Paints trades at a PE multiple of 28.8x and
23.8x FY13 & FY14 consensus earnings estimates and at premium
valuations. Considering, unfavorable macro environment and premium
valuations, we recommend a SELL on the stock,” says Ventura research
report
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