Re: {LONGTERMINVESTORS} Asian Paints: thread

Strong operating performance

·         Consolidated revenue grew 10.2% YoY (+0.6% QoQ) to INR 40.8bn. Domestic decorative business witnessed low double digit growth for the 3^rdconsecutive quarter and rural business continues to outpace the urban growth. Industrial paint business also grew well during the quarter.

·         International business posted a good numbers aided by strong demand pickup in Nepal, UAE and Fiji, while Ethiopia business was impacted due to currency headwinds.

·         Home improvement business grew by 23.7% YoY to INR 704.1mn aided by network expansion and product enhancement.

·         Gross profit margins expanded by ~360bps YoY to 42.1% and EBITDA margin increased by ~177bps YoY to 20.09%; Employee expense inched up by ~40bps YoY and other expenses up ~150bps YoY. EBITDA grew 20.9% YoY and +17.6% QoQ to INR 8.2bn.

Valuation: Management commentary indicates the growth in the domestic decorative segment will pickup gradually over the next 2-3 quarters aided by the normal monsoon and 7^th pay commission. The benign RM prices seem to be peaked out, which will curtail further margin expansion. We are positive on the long term prospects of the domestic decorative paints business; However, the stock has run up sharply factoring the near term positive; we assign a target P/E of 38X on FY18E (+2SD 10yrs avg. 1yr forward P/E) to arrive at a target price of INR 992 and with a MARKETPERFORMER rating. Risks: Adverse Raw material, currency movement, inability to pass on price increases, tapering off of volume growth.

 

Regards,

CSEC Research

​ 

--
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.