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Recommendations India

Asian Paints 4QFY2014 performance highlights and results update

May 29, 2014, Thursday, 06:28 GMT | 01:28 EST | 09:58 IST | 12:28 SGT
Contributed by Angel Broking

For 4QFY2014, Asian Paints (APL) posted a 14.5% yoy growth in earnings to Rs.287cr, led by strong performance in the domestic decorative business. Volume growth in the domestic decorative business stood at ~14%.

Key highlights of the quarter: For 4QFY2014, Asian Paints posted a strong 20.4% yoy growth in its consolidated top-line to Rs.3,266cr. Volume growth in domestic decorative business was led by healthy demand from tier 2 and tier 3 cities. Price hikes (cumulative price hike of 6.25% in FY2014) carried out by the company aided growth on the top-line front. Industrial paints and automotive coatings continue to be impacted by slowdown in the economy. International business posted a healthy performance led by Asia and the Middle East operations. Gross margins fell by 166bp on a yoy basis on account of increase in monomer prices. The OPM fell by 16bp on a yoy basis to 13.6%, impacted by lower gross margins. The bottom-line rose by 14.3% yoy to Rs.287cr. Asian Paints has ceased manufacturing activity at its Bhandup plant and expects the impact of voluntary retirement / separation scheme to be of ~Rs.28cr in FY2015. The company has acquired the front end sales business of Ess Ess Bathroom products and has thus expanded its offering in the Home improvement space. Asian Paints has also acquired a 51% stake in Kadisco Chemicals, Ethiopia, in April 2014 to aid its entry in African markets.

Outlook and valuation: Over FY2014-16E, we expect the company to post a CAGR of 15% and 18% in its top-line and bottom-line respectively. At the current market price, the stock is trading at 29.5x FY2016E earnings. We maintain our Neutral view on the stock.