Asian Paints shares jumped nearly 9 per cent on Thursday, after the company reported double digit volume growth in the June quarter.
According to PhillipCapital, Asian Paints’ volume growth was better than that reported by other FMCG companies. Decorative coatings grew in double digits, while automotive coatings and industrial paints also saw good growth, it added.
India’s biggest paint manufacturer posted a net profit of Rs 552 crore, while total income from operations rose to Rs 4,082 crore, in line with estimates.
“Consolidated revenues grew 9 per cent year-on-year to Rs 3,640 crore, EBITDA and PAT growth of 20 per cent and 18 per cent respectively were broadly in line with our estimates,” said Kotak Institutional Equities.
Asian Paints’ EBITDA or operating margin expanded by 220 basis points year-on-year to 22.6 per cent in the June quarter, mainly on account of lower input prices.
Asian Paints’ management plans to invest Rs 600 crore in capex in FY17.
Phillip Capital upgraded Asian Paints to “neutral” and raised its target price on the stock to Rs 1,000 from Rs 850.
“The company has consistently delivered on topline and bottom line in the last five quarters while other FMCG companies have struggled to deliver strong growth. Also, it has significant pricing power – despite significant fall in raw material prices, it has not been forced to drastically slash prices to defend market share,” the brokerage said.
Kotak on the other hand maintained its “reduce” call on Asian Paints, though it raised its target price on the stock to Rs 950 from Rs 865 earlier.
“We continue to find the stock (at nearly 42 times FY18 EPS) expensive and expect another round of time correction in the stock,” it said.
As of 10.16 a.m., Asian Paints shares traded 7.6 per cent higher at Rs 1,142.95, outperforming the Nifty that was up 0.25 per cent.