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Asian Paints 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, Asian Paints (APL) posted a modest performance on the top-line and on the earnings front. The company’s top line grew by 22% yoy to Rs.2,561cr (Rs.2,100 cr), in-line with our estimates. Earnings grew by 16.6% yoy to Rs.257cr (Rs.220cr), above our estimates. Operating profit dipped by 91bp yoy to Rs.397cr (Rs.331cr) due to high raw-material costs and other expenses (up 19bp yoy). We maintain our Neutral view on the stock.

Key highlights of the quarter: For 3QFY2012, APL registered steady top-line growth at the consolidated level as well as at the standalone level. Growth was led by the full effect of prices hikes taken earlier. APL took ~2.2% price hikes in the month of December 2011. On the international front, Asian and South Pacific markets showed good growth. Political scenario in the Middle East still hovers and affects APL’s growth prospects negatively. The Carribean region showed flattish performance during the quarter.

Outlook and valuation: Post 3QFY2012 results, we maintain our previous revenue and earnings estimates. At Rs.2,966, the stock is trading at 23.5x FY2013E revised EPS of Rs.126.3. We believe the stock is richly valued and offers limited upside from the CMP. Hence, we maintain our Neutral view on the stock.