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Asian Paints 2QFY2013 performance highlights and results update

Contributed by Angel Broking

For 2QFY2013, Asian Paints (APL) posted a 14.6% yoy growth in its bottom-line which is in line with estimates. Volume growth for the domestic business is estimated to be ~5-6% yoy for the quarter. The OPM fell by 54bp yoy to 13.8%. We maintain our Neutral view on the stock.

Key highlights of the quarter: For 2QFY2013, APL registered a 16.2% yoy growth in its consolidated top-line to Rs.2,616cr. On a stand-alone basis, the revenue rose by —16.2%, indicating a ~5-6% decline in the domestic volumes considering the price hikes taken by the company over the last one year. Volume growth for the quarter is decent considering the high base as the festival season sales occurred during 2QFY2012. However, there is a shift in the festival season to 3QFY2013 in the current year. The performance on the volume front is much better than the — 1-2% yoy de-growth reported in 1QFY2013. The consolidated OPM fell by 54bp yoy to 13.8%. The cumulative price increase for 1HFY2013 stood at 5.3%. The company didnRs.t take any price hikes during the quarter.

Outlook and valuation: APL is currently facing a problem of demand uncertainty both in the domestic and international markets. Over FY2012-14E, we expect the company to post a CAGR of 17% and 19.2% in its top-line and bottom-line respectively. At the current market price, the stock is trading richly at 26.5x FY2014E Earnings. Hence, we maintain our Neutral view on the stock.