Technology

Asian Paints’ posted a healthy performance for 3QFY2014, both on the top-line as well as the bottom-line front. For the quarter, the company’s top-line grew by 13.9% yoy to Rs4,160cr while the reported Adj.PAT grew ~35% yoy to `499cr.
Key highlights: For 3QFY2016, Asian Paints’ consolidated top-line posted a double-digit growth of 13.9% yoy to Rs4,160cr on the back of healthy festival season demand. However, heavy rainfall in south India did impact its sales performance. The company’s protective and powder coatings business did well with the segment benefitting from lower material prices. Its international business posted healthy growth, particularly in the Middle East and Bangladesh. However as per the Management, the domestic demand environment continues to be challenging.
On the operating profit front, the company reported a growth of 27.9% yoy due to healthy sales growth and lower material prices. The operating profit margin was up by 197bp yoy to 18.0% due to easing material prices and employee costs as a percentage of sales. During the quarter, the company reported an adjusted net profit of 35.4% yoy to Rs499cr.
Outlook and valuation: We expect Asian Paints to post a ~10.2% and ~11.9% CAGR in its top-line and bottom-line respectively, over FY2015-18E. At the current market price, the stock is trading at 40.9x FY2018E earnings. We maintain our Neutral view on the stock.

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