asian paints stock industries paints stock highlights

It may be noted that the December 2008 quarter results were disappointing as raw material costs shot up 27 per cent (revenues were up just 10 per cent) due to higher prices of titanium dioxide. While the spurt in profit is partly due to the base effect, operating leverage added to margin gains. Net profit growth was slightly better at 256 per cent (Rs 178.7 crore), partially helped by a lower tax rate.

The company’s consolidated sales, too, grew a healthy 22.5 per cent to Rs 1,600 crore, while net profit jumped 236.5 per cent to Rs 198.6 crore for the December quarter.

The company management says it may be difficult to sustain margins. However, the company’s volume growth should be better than the industry, say analysts, who have upwardly revised their earnings estimate for 2010-11.

At Rs 1,933, the stock trades at 22 times estimated 2010-11 consolidated earnings and looks fairly valued. Looking ahead, it is expected it to perform in line with the markets.
source - BS

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Asian Paints Ltd (updated - 01 June 2010)
The stock of Asian Paints keeps hitting new highs and is quoted at a steep premium to its peers. There is a reason behind this. For one, the company has maintained its leadership in the domestic market and has been spreading operations globally. No wonder the company keeps surprising analysts with its strong performance.

Consolidated revenues jumped 32 per cent year-onyear (y-o-y) to Rs 1,877 crore in the March quarter. Reason: Subsidiaries, which account for about 30 per cent of sales, rose at the highest-ever rate of 79 per cent and domestic growth was strong at 18 per cent on a high base of last year. However, domestic revenues were flat sequentially. On an annual basis, operating profit margins expanded lower than expected at 413 basis points to 16.6 per cent, as raw material costs jumped more than 50 per cent and share in revenues leaped by 740 basis points to 56 per cent. However, they remained flat on a sequential basis.

Volume growth is expected to remain strong for the leader, as its distribution network has grown to over 15,000 outlets from around 12,500 a year ago. Moreover, the company is setting up distribution centres near factories to reduce warehouse inventories. Recently, Asian Paints raised prices by three-four per cent to offset increase in input costs and excise duty. Going ahead, analysts expect that a further rise in input costs and rupee depreciation against the dollar will make things worse for the company, since 50-60 per cent raw materials are imported. Frequent steep price rises will be difficult, as demand for decorative paints is likely to be hit due to higher interest rates, affecting new home sales and subdued activity in old homes till the festival season.

However, demand for industrial paints - though a smaller division - has revived with economic growth. Thus, margins are now more vulnerable.
source - business standard

Asian Paints Ltd (updated - 16 Feb 2010)
While the Asian Paints stock has performed better than the Sensex since October 2009 on the back of improving prospects, its outperformance in the last fortnight can be attributed to its better-than-expected quarterly results. Since January 25 (post-result), the stock has risen almost 9 per cent, as against the 4.4 per cent decline in Sensex.

For the December 2009 quarter, though, sales growth was largely in line with analysts’ expectations and operating and net profits were ahead of the Street’s estimates. The company’s standalone top-line growth of 26.8 per cent was aided by robust increase in volumes, driven by good demand in urban markets, Tier-II and TierIII cities.

Operating profit margins galloped to 20.35 per cent compared to just 8 per cent in the December 2008 quarter. Consequently, operating profit jumped 223 per cent to Rs 260 crore. According to analysts, the gains were largely driven by a decline in the per unit cost of raw material, the benefits of which were not fully passed to customers.

Asian Paints Ltd (updated - 24 Dec 2010)
The demand for decorative paints, which account for a bulk of Asian Paints’ revenues, is robust, as paints are increasingly being looked at as a necessity and not just a discretionary spend. The industry has a strong linkage to the gross domestic product (GDP) growth. As aresult, the Indian paint industry gets to cater the second-fastest growing market after China.

Though competition is increasing due to entry of global players and capacity expansions, analysts believe companies have reasonable pricing power on account of rising incomes and a shift in consumer preferences to the high-margin and fast-growing emulsions category.

With a 51 per cent market share, Asian Paints will be the biggest beneficiary of the industry growth. Moreover, competition is limited, as its distribution network of 27,000 dealers (twice its closest peer) is a good entry barrier.

Spiralling raw material prices, specifically crude-oil based goods that account for 35-40 per cent of total raw material cost, are a concern. But, the company has been able to maintain margins through price increases and an improved product mix (high-margin emulsions account for about a third of its revenues). The company had raised prices by eight per cent in the first half of 2010-11 and there would be asmall increase in the second half as well.

After a subdued September quarter, the company is expected to report a strong performance in the December quarter, as the pre-Diwali buying shifted to the third quarter of 2010-11, while it was in the September quarter last year. Though margins are expected to be stable, there could be some negative surprises on raw material and advertising cost fronts.

The stock, which hit an all-time high of `3,027 on Thursday and trades at 27 times 2011-12 average estimated earnings, is not cheap. However, there is a strong possibility that analysts will revise earnings forecast upwards, after which the priceearnings multiple may not seem high.
source - business standard