Asian Paints’ (APL’s) Q4FY21 consolidated income (up 43.5% y-o-y) beat our expectations, whereas Ebitda (up 53.4% y-o-y) and PAT (up 81.1% y-o-y) got here beneath our estimates. The Ornamental enterprise clocked multi-quarter excessive quantity progress (48% y-o-y on tender base of ~1% y-o-y) led by a robust efficiency within the premium and luxurious portfolios. Inflation in uncooked materials costs led to gross margin compression of 266bps y-o-y, although on a softer base. In the meantime, price optimisation and enhancements in sourcing lifted Ebitda margin by 128bps YoY.
General, we imagine APL’s operational prowess and market management will assist it proceed to drive quantity progress. Preserve Purchase with revised TP of Rs 3,185.
Premium and luxurious portfolios drive volumes: Standalone gross sales grew 46.2% y-o-y, persevering with its spectacular run. The home ornamental enterprise delivered a stellar efficiency, registering 48% y-o-y quantity progress. The house enchancment enterprise additionally clocked file gross sales aided by the house décor enterprise (EssEss’s income up 83.9% y-y and Modern’s 78.1% y-o-y). The Industrial coatings enterprise delivered a strong efficiency in protecting coatings and re-finish segments supported by the uptick in industrial exercise. The worldwide enterprise continued to file distinctive double-digit quantity progress, led by good progress in Asia and the Center East. All in all, with the demand momentum sustaining, we count on APL’s sturdy double-digit quantity progress in ornamental enterprise to maintain.
Q4FY21 convention name: Key takeaways: The corporate has taken a value hike of two.8% efficient Could 1st. Tier 1 and a couple of cities noticed a pick-up in demand from Q3-end onwards. Tier 3 and different areas continued their sturdy momentum. The corporate is specializing in bettering volumes and growing the kitchen and bathtub enterprise to enhance its dwelling décor enterprise within the brief run and to steadily enhance profitability over medium time period.
Outlook: Shining shiny – We count on double-digit progress in ornamental volumes to maintain, driving potential demand shift from unorganised section (~30%). This coupled with APL’s skill to boost costs ought to assist it keep margin. Contemplating top-line outperformance, we’re elevating the TP to Rs 3,185 (from Rs 3,140); retain ‘BUY/SO’ (54.2x FY23E EPS).