HSBC puts 'overweight' rating on Asian Paints
Given that on a yoy basis the unit selling price has gone down, HSBC estimate volume growth at 20-25 %, with a fair bit of up-trading, which is very encouraging in terms of consumer sentiment rebound and hints at market share gains.
By ET Bureau |
CMP: Rs 1676
Asian Paints reported sales growth of 17% for the quarter. Given that on a yoy basis the unit selling price has gone down, HSBC estimate volume growth at 20-25 %, with a fair bit of up-trading, which is very encouraging in terms of consumer sentiment rebound and hints at market share gains.
This also means that it is unlikely that there could be further price cuts this year. Gross margins expanded 425 bps yoy, vs. estimate of 300 bps, indicating commodity prices were more benign than expected, and although the recent price increases leaves scope for upward revision to the full year profit figure.
HSBC revise their EPS estimates by 10% for FY10e mainly on account of gross margin expansion on back of benign commodity costs on a yoy basis. HSBC value Asian Paints at a PE multiple of 22x on October 2011 EPS, a 5% premium to historical average, justified by higher earnings growth estimates. On this basis, the target price is now Rs 1,850 per share. HSBC believe that these results and possible EPS upgrades by the Street will act as a catalyst for the stock.
Asian Paints reported sales growth of 17% for the quarter. Given that on a yoy basis the unit selling price has gone down, HSBC estimate volume growth at 20-25 %, with a fair bit of up-trading, which is very encouraging in terms of consumer sentiment rebound and hints at market share gains.
This also means that it is unlikely that there could be further price cuts this year. Gross margins expanded 425 bps yoy, vs. estimate of 300 bps, indicating commodity prices were more benign than expected, and although the recent price increases leaves scope for upward revision to the full year profit figure.
HSBC revise their EPS estimates by 10% for FY10e mainly on account of gross margin expansion on back of benign commodity costs on a yoy basis. HSBC value Asian Paints at a PE multiple of 22x on October 2011 EPS, a 5% premium to historical average, justified by higher earnings growth estimates. On this basis, the target price is now Rs 1,850 per share. HSBC believe that these results and possible EPS upgrades by the Street will act as a catalyst for the stock.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
