Asian Paints Ltd. share price target

22 January 2019 YoY to INR52.9b (est. INR48.1b) with a calculated volume growth of ~21% (est. 11.5%) in the Domestic Decorative paints business. EBITDA grew by 17% YoY to INR10.4b (est. INR8.7b), and adjusted PAT grew 14.1% YoY to INR6.5b (est.

We increase our FY19 and FY20 EPS by 6.9-6.7% as APNT has posted ~24% Change in Estimates | Target | Reco volume growth in domestic decorative business, first 20% growth number after 3QFY11. Although sustenance of the same is yet to be tested given...

Asian Paints surpassed expectations by delivering 26% domestic growth in Q3, indicative of 20%+ volume growth. Growth was partially supported by a delayed festive season and soft comparables, but it also signals demand pick-up and market share gains. Despite the strong sales performance, earnings grew only 15%, due to higher input inflation, overhead expenses toward the new plants, and higher ad spends and one-off staff expenses. Though input inflation has eased, we expect higher fixed costs relating to...

Asian Paints Ltd (APL) reported subdued numbers for Q2FY19, below our expectation. Its revenue grew by 8.5% yoy driven by volume growth across various products. Its EBITDA and PAT de-grew by 2% and 3.8% yoy respectively on back of higher input costs and higher interest expense. Further, both EBITDA and PAT margins declined by 184 bps and 140 bps yoy.

We move Asian Paints to BUY from HOLD as we now find valuation to be in a reasonable zone after two years of near-zero return. The stock price has swung from its 52-week high of INR1,467 on the day of its 1QFY19 result to near-52-week low level post a 5% fall today in possibly a reaction to a weak 2QFY19 earnings report, due in part to some once-off factors that impacted the quarter's profitability. We are quite confident, though, that margin performance going forward will be much better vs 2QFY19's, given elements of constraint (deferral of price-hike to avoid attracting anti-profiteering provisions) and once-off rebating (on transition stocks at the time of GST rate cut) present in the latter - issues that are unlikely...

Asian paints (APNT), is the market leader in the Indian paint manufacturing industry with a market share of ~53%. Revenue growth of 8.5% in Q2FY19 was below estimate due to weak domestic demand and pricing pressure....

Other income of the company rose 19% to Rs 63.32 crore. Interest cost increased 38% to Rs 12.12 crore. Depreciation rose 7% to Rs 94.74 crore. PBT as a result fell 2% to Rs 740.61 crore. The effective tax rate rose to 32.8% compared to 32.5% owing to which the company's PAT fell...

Asian Paints' (APL) Q2FY19 performance was operationally weak in EBITDA margin terms. We believe paint volume growth at ~10% YoY was achieved through a change in product mix while APL refrained from taking a price hike in an inflationary scenario looking at festive demand around the corner. It has instead passed on the GST rate cut to its dealers with immediate effect to fast liquidate the inventory. APL has taken a price hike of 2.35% effective from October 1, 2018 and guided at a few more price hikes in upcoming...

Asian Paints (APNT) has reported significantly lower-than-estimated performance in 2QFY19 led by disappointing realisation growth. APNT saw a significant increase in distemper and putty sales (low-realisation products) compared to the base quarter having higher contribution of emulsion paints. Though the Company hiked prices by 2.35% in Oct'18, it may not completely offset the spiraling input cost witnessed in Sept'18 led by INR depreciation and higher crude prices. Looking ahead, we believe APNT will continue to witness challenges on margin front, as fixed cost will continue to rise owing to commissioning of new plant, while price hikes are likely to be calibrated. We remain cautious on APNT on account of high valuation multiple of 42x FY20E...