Result Update on Asian Paints for 4QFY2011

Result Update on Asian Paints for 4QFY2011 

The numbers for this quarter are not comparable on a yoy basis as 4QFY2010 included six month results of overseas subsidiaries. We maintain our Accumulate recommendation on the stock.

Domestic volumes steady, international business affected by unrest in MENA: The top line grew by 4.7% yoy to `1,965.6 (`1,876.8cr), however in comparable terms, the growth was 22.6% yoy which was robust. For the full year, the company registered a paint volume growth of 17% yoy on a standalone basis, while on a consolidated comparable basis with overseas subsidiaries, the revenue was aided by 19.5% yoy growth. Earnings declined by 10.7% yoy to `190.9cr (`213.8cr), as the company faces margin pressures. The company’s operating profit declined by 184bp yoy to `289.4cr (`310.8cr) on account of high raw-material costs and other expenses (up 37bp yoy).

Outlook and valuation: Post 4QFY2011 results, we have tweaked our top-line numbers to factor in relative sluggishness in demand in the company’s international business (particularly in certain pockets of South Asia and Middle East). We have pruned our margin estimates to factor in gross margin pressures that the company faces on account of unrelenting increase in crude prices but expect margins to sustain at 17%, aided by higher value growth and ~4% weighted average price hike taken in FY2012 (further prices not rules out). 
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