Strong growth. Asian Paints reported a strong 4QFY10, with adjusted net profit growing 73%. We expect it to maintain its growth momentum and estimate earnings CAGR of 20% over FY10-12. We raise earnings for FY11e/12e and target price to Rs2,520 from Rs2,400. Maintain Buy. n Decorative business driving performance. Asian Paints' 32% revenue growth in 4QFY10 was driven mainly by the strong performance of the decorative paints segment. n Higher EBITDA margin. EBITDA margin rose 400bp due to lower raw material costs and the effective tax was 357bp lower. Net profit was up 87% yoy. n 4QFY10 adjusted performance. 4QFY10 consolidated results include the results of some subsidiaries for six months. Adjusting for this, revenue rose 16% and net profit 73%. n Change in estimates. We factor in lower raw material costs and raise FY11 and FY12 earnings estimates, respectively, by 4% and 6%. n Valuation. We raise the target price to Rs2,520 (earlier Rs2,400) at 22x 12-month forward earnings. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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