Asian Paints Ltd. share price target

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.

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...

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....

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...

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' 2QFY19 report was a clear disappointment more from a mix/margin angle, even as volume growth of low double-digit' turned out to be tad higher vs our forecast of c.8%. What is not clear, though, is how a double-digit volume growth translated into a mere 8.5% growth in revenue, considering the cumulative price-hike of 3.5% effected thus far (1.5% in Mar'18 plus 2% in May'18; the pricing action in Jul'18 was realisation-neutral, i.e. price-cut was effected to entirely pass on the 10ppt cut in GST rate). This apparent deterioration in mix further pressured margin which seems to have compressed much more than warranted by the inflation in RM prices. One possible explanation could be additional...

The Indian paints industry is estimated to grow at a healthy pace of 13% CAGR over the next two years to Rs 70,875 cr, led by Government's initiative towards promoting the growth of housing sector, rising disposable income and reduction in average repainting cycle.

Revenue fell by 2.08% to Rs. 4390.27 Cr in Q1FY19 when compared to the previous quarter. Asian Paints Ltd Q1FY19 results Comment

Tailwinds in volume will colour the canvas... Asian paints (APNT), is the market leader in the Indian paint manufacturing industry with a market share of ~53%....

APL is the industry leader in the decorative paint segment with 53% market share and a dealer network of over 52,000 across India. It derives 89% of its topline from the decorative segment while the rest comes from the industrial segment. We believe paint companies will be key beneficiaries of the government's key reforms like implementation of GST along with thrust to increase rural income levels. Normal monsoons and additional government expenditure in rural schemes are likely to boost rural disposable income and, in turn, their consumption. GST would...

For quarter ended June 2018, net sales rose 15% to Rs 4390.27 crore compared to corresponding previous year period. The company operating margins rose 250 bps to 19.9%. As a result operating profit growth grew 31% to Rs 874.44 crore. Cost of raw material consumed as a percentage of net sales (net of stock adjustment) fell 30 bps to 53%, purchase of stock in trade fell 20 bps to 5.6%, employee benefit expense fell 50 bps to 6.7% and other expense decreased 140 bps to 15.6%. Other income of the company fell 21% to Rs 61.65 crore. Interest cost increased 10% to Rs 8.77 crore. Depreciation remained flat at Rs 90.5 crore. PBT as a result rose 30% to Rs 836.82 crore....

Improvement in the outlook for volume growth and cost efficiencies makes us to increase our estimates marginally. However, likely delay in price hike post the GST rate cut may restrict near term upsides. We maintain HOLD with a revised Target Price (TP) of Rs1,370...

APL's high-volume trajectory continues with strong ~13-14% growth during Q1FY19. The performance was impressive considering further reduction in volume growth gap between APL and Kansai. In FY18 APL reported lower volume growth compared to Berger and Kansai. We believe that the improvement in the volume growth was primarily due to improvement in the rural growth. Going ahead, we believe that the growth momentum in the paints industry would sustain considering - (1) Overall paint industry to boom from better monsoon (2) favorable base (3) rural stimulus pre-election and (4)...

Asian Paints consolidated revenue from operations has risen by 14.1 % to Rs 4,492.30 crore for the quarter ended March 31, 2018 from Rs 3,936.72 crore in Q4FY2017. Profit before depreciation, interest, tax and other income (PBDIT) for the group increased by 18.7 % to Rs 839.93 crore from Rs 707.83 crore. Profit before tax (PBT) increased by 12.4 % to Rs 783.61 crore from Rs 697.07 crore. Net Profit after Minority Interest increased 4.6 % to Rs 480.99 crore as compared to Rs 459.99...

Revenue increased by 5.24% to Rs. 4483.58 Cr in Q4FY18 when compared to the previous quarter. Asian Paints Ltd Q4FY18 results Comment

Both the underperforming segments of Home improvement business including Kitchen (Sleek) and bathroom (EssEss), have reported strong financial performance which is healthy for the company. Other expenditure was significantly high in the quarter (+8.8% YoY and +29.2% QoQ), which impacted the operational performance. Source: Kotak Securities - PCG; Company...

Asian Paints (APL) recorded strong growth in net sales by ~15% YoY to | 4483.6 crore (I-direct estimate - | 4345.7 crore) led by a mix of volume growth and price hikes. We believe volume growth of ~11% during the quarter was led by both decorative and industrial paint demand. During FY18, the company took two price hikes in May 2017 and May 2018 by 2.7% and 1.4%, respectively. APL has guided at further hike in prices to offset rising inflationary pressure in raw materials. On the international front, poor...

grew in double-digits led by improved demand conditions. 47.2 Gross margin contracted 50bp YoY to 43.2%, but the impact was offset by CMP: INR1,215 TP: INR1,280(+5%)...