14 May 2014
4QFY14 Results Update | Sector:
Consumer
Asian Paints
BSE SENSEX
23,815
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,109
APNT IN
959.2
534.2/9.0
560/376
-2/-8/-3
Financials & Valuations (INR b)
Y/E MAR
Net Sales
EBITDA
Adj PAT
Adj.EPS(INR)
Gr. (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2014 2015E 2016E
125.8
18.6
12.3
12.8
10.3
40.6
35.1
39.1
43.5
13.7
146.5
22.3
14.9
15.5
21.1
48.0
36.0
40.2
35.9
11.6
172.3
26.6
17.9
18.7
20.3
56.7
36.7
41.2
29.8
9.8
CMP: INR557
TP: INR520
Neutral
Asian Paints’ (APNT) 4QFY14 results beat our expectations, with consolidated Adj.
PAT at INR3b, up 18.4% YoY (est. INR2.9b). Consolidated net sales grew 21.4%,
9% above estimate, at INR32.6b (est. INR31.3b) led by an estimated 12-13%
domestic paints volume growth (est. 10%). EBITDA margin contracted 30bp at
13.6% (est. 14.3%).
Gross margin declined 150bp YoY but expanded 80bp sequentially. APNT has
announced price hikes of 1% and 1.2% effective May 1 and June 1, 2014
respectively to offset the pressure on gross margin.
EBITDA margin was down 30bp YoY and stood at 13.6%, primarily led by RM
inflation (+150bp YoY), which was partially offset by savings in other expenditure
(-60bp YoY) and employee costs (-60bp YoY).
Commissioning of Khandala plant resulted in higher depreciation costs which
went up 27% YoY. Other income, which grew 24.7% to INR267m, and lower tax
rate (lower by 110bp YoY to 30.2%) aided the 19.2% YoY adjusted PAT growth.
Reported PAT stood at INR2.89b, up 14.5%, impacted by one-off expenses
pertaining to shutdown of Bhandup plant of INR100m.
Net cash nearly doubled to INR11.8b v/s INR6.1b in FY13. FY14 sales, EBITDA and
PAT growth stood at 15.7%, 11.8% and 10.3%, respectively.
APNT has entered into a binding agreement to acquire the front-end sales
business, including brands, network and sales infrastructure of Ess Ess Bathroom
Product Private Ltd, subject to statutory approvals. Deal value is not disclosed.
Valuation and view:
Consistent double digit decorative paints volume growth in
subdued macro environment is a key positive. This was driven by superior
performance of Tier II and III towns, as per management. Acquisition of Ess Ess
indicates management’s intention to diversify the business into allied home décor
categories. At 35.9x FY15E EPS, valuations are expensive given historical
comparison, in our view. We maintain a
Neutral
with a revised target price of
INR520, valuing APNT at 28x FY16E. Spike in RM costs, currency depreciation
constitute key downside risks.
Gautam Duggad
(Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404
Manish Poddar
(Manish.Poddar@MotilalOswal.com); +91 22 3027 8029
Investors are advised to refer through disclosures made at the end of the Research Report.