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Asian Paints Results

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					                                                                                                          4QFY2012 Result Update | FMCG
                                                                                                                                    May 11, 2012



 Asian Paints                                                                                        NEUTRAL
                                                                                                     CMP                               `3,619
 Performance Highlights                                                                              Target Price                           -
 (` cr)                        4QFY12         4QFY11         % yoy         Angel est.      % Diff    Investment Period                         -
 Revenue                           2,539        1,966         29.2            2,406          5.5
 EBITDA                             377             289       30.1                330       14.1
 OPM (%)                                                                                            Stock Info
                                    14.8            14.7      11bp                13.7     113bp
                                                                                                    Sector                                  FMCG
 PAT                                261             186            40             223       16.9
 Source: Company, Angel Research                                                                    Market Cap (` cr)                       34,709
                                                                                                    Beta                                       0.3
 For 4QFY2012, Asian Paints (APL) posted an impressive performance, beating our                     52 Week High / Low               3744/2551
 top-line and bottom-line estimates. The company’s top line grew by 29.2% yoy to                    Avg. Daily Volume                        9,597
 `2,539cr. OPM increased marginally by 11bp yoy to 14.8%. Net profit grew by                        Face Value (`)                             10
 40% yoy to `261cr. We maintain our Neutral view on the stock.                                      BSE Sensex                              16,293
                                                                                                    Nifty                                    4,929
 Key highlights of the quarter: For 4QFY2012, APL registered good top-line growth
                                                                                                    Reuters Code                       ASPN.BO
 as well as impressive bottom-line growth. Growth was led by higher volumes and
                                                                                                    Bloomberg Code                     APNT@IN
 increased realization on account of price hikes taken by the company during the
 year. We estimate domestic volume growth to be ~16% yoy. The cumulative price
 increase for FY2012 stood at 12.28%. The company has taken further price hikes                     Shareholding Pattern (%)
 of 2% and 3.2% w.e.f. from March 29, 2012 and May 1, 2012, respectively.                           Promoters                                52.8
 On the international front, South Asian business showed healthy 31% growth in                      MF / Banks / Indian Fls                   8.8
 FY2012, while Middle East grew by lower 12.1%, impacted by the continuing                          FII / NRIs / OCBs                        19.4
 political turmoil in the region.                                                                   Indian Public / Others                   18.9

 Outlook and valuation: APL is currently impacted by dual problems of demand
                                                                                                    Abs. (%)                 3m       1yr      3yr
 slowdown and high crude oil prices. However, the company has managed to
                                                                                                    Sensex                (8.2) (12.3)       39.5
 maintain its growth due to price hikes. Going ahead, we believe it would be
                                                                                                    APNT                 16.7       34.9 295.9
 challenging for the company to carry out further price hikes without compromising
 on volume growth. At the CMP, the stock is trading richly at 24.4x FY2014E.
 Hence, we maintain our Neutral view on the stock.

 Key financials (Consolidated)
  Y/E March (` cr)                         FY2011     FY2012E           FY2013E          FY2014E
  Net Sales                                 7,706          9,598         11,423           13,309
  % chg                                      15.3           24.6           19.0             16.5
  Net Profit (Adj.)                          843            989           1,202            1,424
  % chg                                       1.0           17.3           21.5             18.5
  EBITDA margin (%)                          17.0           15.4           16.3             16.3
  EPS (`)                                    87.9          103.1          125.3            148.4
  P/E (x)                                    41.2           35.1           28.9             24.4
                                                                                                    V Srinivasan
  P/BV (x)                                   15.9           12.5            9.8              7.7
                                                                                                    022-39357800 Ext: 6831
  RoE (%)                                    43.3           39.8           38.0             35.4    v.srinivasan@angelbroking.com
  RoCE (%)                                   45.8           43.0           44.2             41.6
  EV/Sales (x)                                4.4            3.6            2.9              2.5    Amit Patil
                                                                                                    022-39357800 Ext: 6503
  EV/EBITDA (x)                              25.8           23.1           18.1             15.4
                                                                                                    amit.patil@angelbroking.com
 Source: Company, Angel Research

Please refer to important disclosures at the end of this report                                                                                1
                                                         Asian Paints | 4QFY2012 Result Update



               Exhibit 1: Quarterly performance
               Y/E March (` cr)              4QFY12      4QFY11   % chg   FY2012   FY2011 % chg
               Net Sales                         2,539    1,966    29.2    9,598    7,706    24.6
               Consumption of RM                 1,520    1,153    31.9    5,777    4,475    29.1
               (% of Sales)                       59.9     58.6             60.2     58.2
               Staff Costs                        135       115    17.8     526       454    15.9
               (% of Sales)                        5.3      5.8              5.5       5.9
               Other Expenses                     507       409    24.0    1,821    1,464    24.2
               (% of Sales)                       20.0     20.8             19.0     19.1
               Total Expenditure                 2,162    1,676    29.0    8,123    6,394    27.0
               Operating Profit                   377       289    30.1    1,475    1,313    13.7
               OPM                                14.8     14.7             15.4     16.9
               Interest                            17         8   118.4      41        23    76.5
               Depreciation & Amortisation         31        29     7.6     121       113     7.2
               Other Income                        47        20   135.5     141        83    69.8
               Profit/Loss from Associate            -        -                -         -
               PBT (excl. Extr Items)             376       273    37.7    1,454    1,260    15.4
               (% of Sales)                       14.8     13.9             15.1     16.4
               Provision for Taxation             110        82    34.1     434       378    14.6
               (% of PBT)                         29.2     30.0             29.8     30.0
               Minority Interest                    5         5              32        38
               Recurring PAT (After MI)           266       191    39.3    1,020      881    15.8
               Extr Income/(Expense)                 -        -                -         -
               Prior Period Items                    -        -                -         -
               Reported PAT                       261       186    40.1     989       843    17.2
               PATM                               10.3      9.5             10.3     11.0
               Equity shares (cr)                  10        10              10        10
               Adjusted EPS (`)                   27.2     19.4    40.1    103.0     87.9    17.2
               Source: Company, Angel Research


               Good top-line growth, aided by price hikes

               APL reported healthy growth of 29.2% yoy in its consolidated top line to `2,539cr.
               The company achieved yoy higher realization on account of 12.28% cumulative
               price hikes taken in FY2012. The company has taken further price hikes of 2% and
               3.2% w.e.f. from March 29, 2012 and May 1, 2012, respectively. On the
               international front, South Asian business showed healthy 31% growth in FY2012,
               while Middle East grew by lower 12.1%, impacted by the continuing political
               turmoil in the region. Growth in Caribbean and Singapore businesses was affected
               by subdued economic conditions. The Caribbean business grew by 9.6% yoy to
               `172cr during the quarter.




May 11, 2012                                                                                   2
                                                                                                                  Asian Paints | 4QFY2012 Result Update



                                                          Exhibit 2: Top-line growth driven by value
                                                                   3,000                                                                                               35.0

                                                                   2,500                                                                                               30.0

                                                                                                                                                                       25.0
                                                                   2,000




                                                                                                                                                                               (yoy %)
                                                                                                                                                                       20.0




                                                          (` cr)
                                                                   1,500
                                                                                                                                                                       15.0
                                                                   1,000
                                                                                                                                                                       10.0
                                                                    500                                                                                                5.0

                                                                      -                                                                                                -




                                                                              4Q10


                                                                                      1Q11


                                                                                                    2Q11


                                                                                                           3Q11


                                                                                                                   4Q11


                                                                                                                              1Q12


                                                                                                                                      2Q12


                                                                                                                                                   3Q12


                                                                                                                                                                4Q12
                                                                                                Top-line (LHS)                  yoy growth (RHS)

                                                          Source: Company, Angel Research



                                                          Gross margin down 124bp yoy, OPM ends flat

                                                          During the quarter, APL’s gross margin contracted by 124bp yoy due to higher
                                                          input costs. However, OPM registered a marginal increase of 11bp yoy to 14.8%
                                                          on account of higher prices and reduction in staff cost by 52bp yoy.

                                                          Net profit grows by 40% yoy

                                                          In terms of net profit, on a consolidated basis, APL reported 40% yoy growth to
                                                          `261cr, driven by better operating performance and higher other income.

Exhibit 3: OPM flat on a yoy basis                                                   Exhibit 4: PAT up by 40% yoy
      50.0                                                                                    310                                                                          100.0
             44.2   42.7   43.7
                                  40.3   41.4   40.1   40.0                40.1
                                                                   39.4                       260                                                                          80.0
      40.0
                                                                                              210                                                                          60.0
      30.0




                                                                                                                                                                                  (yoy %)
                                                                                     (` cr)




                                                                                              160                                                                          40.0
(%)




                    19.0   18.3
             16.6                 16.4          17.3
      20.0                               14.7          14.3        15.5    14.8
                                                                                              110                                                                          20.0

      10.0                                                                                    60                                                                           -

        -                                                                                     10                                                                           (20.0)
             4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12                                            4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12
                            OPM                   Gross margin                                                    PAT (LHS)                  yoy growth (RHS)


Source: Company, Angel Research                                                      Source: Company, Angel Research




May 11, 2012                                                                                                                                                                         3
                                                      Asian Paints | 4QFY2012 Result Update



               Key highlights of the analyst meet
                   Management indicated challenging demand conditions in the auto and
                   non-auto industrial segments’ growth due to slowdown in the manufacturing
                   industry and subdued investments, but it was confident of good growth in the
                   decorative segment.

                   INR depreciation has negated any effect of input cost cooling.

                   The company undertook price hike of 1.38% during the quarter.

                   Management indicated capex of `400cr and `500cr in FY2013 and FY2014,
                   respectively, towards scaling capacity in Rohtak plant and building the
                   Khandala plant.



               Investment arguments
                   Uncertainty over demand conditions hover: APL has started to witness
                   slowdown in demand for paints. Going ahead, we do not expect demand to
                   be robust, considering the uncertainty on the macroeconomic front.

                   Margin pressure to continue: We expect APL to post an improvement in its
                   OPM, but do not expect it to report much improvement in gross margin going
                   ahead. The company has been facing raw-material cost pressure since many
                   quarters. Management maintains that input cost is still high and rupee
                   depreciation has just added to its woes.

                   Sluggishness in the international business: APL’s international business has
                   been sluggish for a few quarters now. We do not expect any positive surprises
                   on this front, as lot of uncertainties prevail in many countries in which the
                   company operates.


               Outlook and valuation

               APL is currently impacted by dual problems of demand slowdown and high crude
               oil prices. However, the company has managed to maintain its growth due to price
               hikes. Going ahead, we believe it would be challenging for the company to carry
               out further price hikes without compromising on volume growth. At the CMP, the
               stock is trading richly at 24.4x FY2014E. Hence, we maintain our Neutral view on
               the stock.




May 11, 2012                                                                                  4
                                                                                                                                                           Asian Paints | 4QFY2012 Result Update



Exhibit 5: Peer valuation
Company           Reco              Mcap     CMP         TP           Upside                   P/E (x)                                      EV/Sales (x)                                        RoE (%)                                     CAGR #
                                    (` cr)    (`)      (R`)               (%)               FY13E FY14E                                    FY13E FY14E                                       FY13E FY14E                                   Sales  EPS
Asian Paints      Neutral       34,709       3,619           -                     -               28.9                  24.4                      2.9                     2.5                  38.0                    35.4                 17.8                    20.0
Britannia         Buy               6,444     540      650                       20                25.6                  20.2                      1.1                     1.0                  45.2                    44.1                 17.0                    34.3
Colgate           Neutral       16,087       1,183           -                     -               28.8                  25.5                      4.8                     4.2               129.4                  120.1                    14.3                    13.8
Dabur             Neutral       18,239        105            -                     -               25.4                  21.5                      3.2                     2.8                  39.3                    42.0                 13.4                    15.1
GCPL              Neutral       17,646        527            -                     -               22.9                  19.2                      3.0                     2.5                  31.2                    38.4                 20.1                    26.7
GSKCHL*           Neutral       11,661       2,773           -                     -               26.9                  22.5                      3.4                     2.8                  34.0                    32.8                 16.8                    20.8
HUL               Neutral       95,438        431            -                     -               30.8                  26.5                      3.6                     3.0                  82.7                    76.2                 16.1                    17.3
ITC               Accumulate   182,794        234      252                        8                27.2                  23.7                      6.4                     5.5                  34.8                    33.1                 16.8                    16.0
Marico            Neutral       10,958        178            -                     -               26.9                  22.0                      2.5                     2.1                  30.0                    28.8                 16.5                    25.1
Nestle*           Neutral       43,818       4,545           -                     -               38.2                  30.8                      5.0                     4.1                  73.0                    61.6                 18.6                    18.3
Tata Global       Buy               6,697     108      136                       26                18.5                  15.4                      0.9                     0.8                    8.9                   10.2                       8.7                8.8

Source: Company, Angel research; Note: # Denotes CAGR over FY2012-14E, *December Year Ending.


Exhibit 6: Angel vs. Consensus
Top-line (` cr)                              FY2013E                    FY2014E                                      EPS (`)                                                                          FY2013E                                         FY2014E
Angel estimates                               11423                          13309                                   Angel estimates                                                                     125.28                                             148.41
Consensus                                     11263                          13234                                   Consensus                                                                                 123.2                                          149.2
Diff (%)                                         1.4                                   0.6                           Diff (%)                                                                                     1.7                                            (0.5)
Source: Angel research, Bloomberg



                                                       Exhibit 7: One year forward PE
                                                             35.0

                                                             30.0

                                                             25.0

                                                             20.0
                                                       (x)




                                                             15.0

                                                             10.0

                                                                 5.0

                                                                  -
                                                                        Dec-06
                                                                                 Mar-07
                                                                                          Jun-07
                                                                                                   Sep-07
                                                                                                            Dec-07
                                                                                                                     Mar-08
                                                                                                                              Jun-08
                                                                                                                                       Sep-08
                                                                                                                                                Dec-08
                                                                                                                                                         Mar-09
                                                                                                                                                                  Jun-09
                                                                                                                                                                           Sep-09
                                                                                                                                                                                    Dec-09
                                                                                                                                                                                             Mar-10
                                                                                                                                                                                                      Jun-10
                                                                                                                                                                                                               Sep-10
                                                                                                                                                                                                                        Dec-10
                                                                                                                                                                                                                                 Mar-11
                                                                                                                                                                                                                                          Jun-11
                                                                                                                                                                                                                                                   Sep-11
                                                                                                                                                                                                                                                            Dec-11
                                                                                                                                                                                                                                                                     Mar-12




                                                       Source: Company, Angel Research




May 11, 2012                                                                                                                                                                                                                                                                  5
                                                           Asian Paints | 4QFY2012 Result Update



               Profit & Loss statement (consolidated)
               Y/E March (` cr)                  FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E
               Gross sales                        6,045    7,107    8,361 10,421    12,369   14,422
               Less: Excise duty                   581      426      655     770      946     1,113
               Net Sales                          5,464    6,681    7,706   9,651   11,423   13,309
               Total operating income             5,464    6,681    7,706   9,651   11,423   13,309
               % chg                               24.0     22.3     15.3    25.2     18.4     16.5
               Total Expenditure                  4,794    5,454    6,393   8,123    9,561   11,140
               Cost of Materials                  3,371    3,758    4,475   5,777    6,900    8,039
               SG&A                                714      853      981    1,232    1,371    1,597
               Personnel                           372      436      454     526      663      772
               Others                              338      406      484     589      628      732
               EBITDA                              670     1,227    1,313   1,528    1,862    2,169
               % chg                                1.4     83.2      7.0    16.3     21.9     16.5
               (% of Net Sales)                    12.3     18.4     17.0    15.8     16.3     16.3
               Depreciation& Amortisation            74       84     113     121      152      177
               EBIT                                596     1,144    1,200   1,406    1,710    1,992
               % chg                               (1.0)    92.0      4.9    17.2     21.6     16.5
               (% of Net Sales)                    10.9     17.1     15.6    14.6     15.0     15.0
               Interest & other Charges              26       28      22      41       16        9
               Other Income                          51     141       83     141      107      107
               (% of PBT)                           8.2     11.2      6.6     9.4      5.9      5.1
               Share in profit of Associates           -        -       -       -        -        -
               Recurring PBT                       620     1,256    1,260   1,507    1,801    2,090
               % chg                               (3.0)   102.4      0.3    19.6     19.5     16.1
               Prior Period & Extra Exp/(Inc.)      3.5     (1.2)       -       -        -        -
               PBT (reported)                      617     1,257    1,260   1,507    1,801    2,090
               Tax                                 197      373      379     434      549      617
               (% of PBT)                          31.8     29.7     30.1    28.8     30.5     29.5
               PAT (reported)                      423      883      881    1,073    1,252    1,474
               Add: Share of earns of asso             -        -       -       -        -       1
               Less: Minority interest (MI)          22       48      38      32       50       50
               PAT after MI (reported)             401      834      843    1,041    1,202    1,424
               ADJ. PAT                            398      836      843    1,041    1,202    1,424
               % chg                               (2.8)   110.0      0.9    23.5     15.4     18.5
               (% of Net Sales)                     7.3     12.5     10.9    10.8     10.5     10.7
               Basic EPS (`)                       41.8     87.0     87.9   103.1    125.3    148.4
               Fully Diluted EPS (`)               41.8     87.0     87.9   103.1    125.3    148.4
               % chg                               (3.9)   107.9      1.0    17.3     21.5     18.5




May 11, 2012                                                                                      6
                                                     Asian Paints | 4QFY2012 Result Update



               Balance sheet (consolidated)
               Y/E March (` cr)             FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E
               SOURCES OF FUNDS
               Equity Share Capital            96       96      96      96      96      96
               Preference Capital                -        -       -       -       -      1
               Reserves& Surplus             1,107    1,614   2,092   2,687   3,440   4,415
               Shareholders’ Funds           1,203    1,710   2,187   2,783   3,536   4,512
               Minority Interest               76       94     110     104     122     122
               Total Loans                    309      229     235     180     125      70
               Deferred Tax Liability          53       56      85      85      85      85
               Total Liabilities             1,641    2,090   2,617   3,152   3,868   4,789
               APPLICATION OF FUNDS
               Gross Block                   1,461    1,500   1,988   2,272   2,539   2,958
               Less: Acc. Depreciation        648      628     715     836     989    1,166
               Net Block                      813      873    1,273   1,436   1,550   1,792
               Capital Work-in-Progress        92      407      43     341     381     444
               Goodwill                        51       37      37      37      37      37
               Investments                     78      624     922     622     622     622
               Current Assets                1,799    1,844   2,319   2,965   3,832   4,669
               Cash                           210      106     133     192     542     834
               Loans & Advances               247      239     295     360     446     519
               Other                         1,341    1,498   1,891   2,413   2,845   3,315
               Current liabilities           1,192    1,695   1,977   2,249   2,554   2,775
               Net Current Assets             607      149     342     716    1,278   1,893
               Misc. Exp. not written off        -        -       -       -       -       -
               Total Assets                  1,641    2,090   2,617   3,152   3,868   4,789




May 11, 2012                                                                              7
                                                       Asian Paints | 4QFY2012 Result Update



               Cash flow statement (consolidated)
               Y/E March (` cr)               FY2009 FY2010 FY2011 FY2012E FY2013E FY2014E
               Profit before tax                622    1,255   1,260   1,454   1,801   2,090
               Depreciation                      74      84     113     121     152     177
               Change in Working Capital       (143)    134    (303)   (250)   (262)   (322)
               Interest / Dividend (Net)          7      (5)    (24)      1     (31)    (38)
               Direct taxes paid                197     373     379     434     549     617
               Others                           (25)     12     109    (104)     18     (50)
               Cash Flow from Operations        337    1,105    776     789    1,129   1,240
               (Inc.)/ Dec. in Fixed Assets    (228)   (354)   (123)   (581)   (307)   (482)
               (Inc.)/ Dec. in Investments      198    (546)   (298)    300        -       -
               Cash Flow from Investing         (30)   (900)   (421)   (281)   (307)   (482)
               Issue of Equity                    0        -       -       -       -       -
               Inc./(Dec.) in loans              (4)    (79)      5     (55)    (55)    (55)
               Dividend Paid (Incl. Tax)        197     236     357     393     449     449
               Interest / Dividend (Net)          7      (5)    (24)      1     (31)    (38)
               Cash Flow from Financing        (207)   (310)   (328)   (449)   (472)   (466)
               Inc./(Dec.) in Cash              100    (105)     27      59     350     293
               Opening Cash balances            111     210     106     133     192     542
               Closing Cash balances            210     106     133     192     542     834




May 11, 2012                                                                               8
                                                       Asian Paints | 4QFY2012 Result Update



               Key ratios
               Y/E March                      FY2009 FY2010 FY2011 FY2012E FY2013E FY2014E
               Valuation Ratio (x)
               P/E (on FDEPS)                   86.5    41.6    41.2    35.1    28.9    24.4
               P/CEPS                           73.5    37.8    36.3    31.3    25.6    21.7
               P/BV                             28.8    20.3    15.9    12.5     9.8     7.7
               Dividend yield (%)                0.5     0.7     0.9     1.0     1.1     1.1
               EV/Sales                          6.4     5.1     4.4     3.6     2.9     2.5
               EV/EBITDA                        51.8    27.9    25.8    23.1    18.1    15.4
               EV / Total Assets                21.2    16.4    12.9    10.8     8.7     7.0
               Per Share Data (`)
               EPS (Basic)                      41.8    87.0    87.9   103.1   125.3   148.4
               EPS (fully diluted)              41.8    87.0    87.9   103.1   125.3   148.4
               Cash EPS                         49.2    95.8    99.7   115.7   141.2   166.9
               DPS                              17.5    27.0    32.0    35.0    40.0    40.0
               Book Value                      125.4   178.3   228.0   290.2   368.7   470.3
               Returns (%)
               ROCE (Pre-tax)                   39.8    61.3    51.0    46.9    48.7    46.0
               Angel ROIC (Pre-tax)             35.0    59.3    57.4    51.7    47.1    46.5
               ROE                              36.4    57.4    43.3    39.8    38.0    35.4
               Turnover ratios (x)
               Asset Turnover (Gross Block)      3.7     4.5     3.9     4.2     4.5     4.5
               Inventory / Sales (days)          51      52      62      56      56      56
               Receivables (days)                38      30      28      36      35      35
               Payables (days)                   68      75      78      71      68      64
               WC cycle (ex-cash) (days)         26       2      10      20      24      29




May 11, 2012                                                                               9
                                                                                              Asian Paints | 4QFY2012 Result Update




 Research Team Tel: 022 - 39357800                   E-mail: research@angelbroking.com                    Website: www.angelbroking.com

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 Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
 other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
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  Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
  latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have
  investment positions in the stocks recommended in this report.




  Disclosure of Interest Statement                                             Asian Paints
  1. Analyst ownership of the stock                                                  No
  2. Angel and its Group companies ownership of the stock                            No
  3. Angel and its Group companies' Directors ownership of the stock                 No
  4. Broking relationship with company covered                                       No

  Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors


 Ratings (Returns):              Buy (> 15%)                            Accumulate (5% to 15%)                     Neutral (-5 to 5%)
                                 Reduce (-5% to 15%)                    Sell (< -15%)


May 11, 2012                                                                                                                              10