Prabhudas Lilladher has reduced FY15 and FY16 EPS estimates by 3-4 percent due to higher employee costs and other expenses. It has increased target price to Rs 639 and upgraded rating from reduce to accumulate
Asian Paints net profit jumped 6.3 percent to Rs 347 crore. The company said the result of the quarter under review is not comparable with the corresponding quarter of the previous year as it acquired 51 percent stake in kitchen solutions provider Sleek International Pvt Ltd in August 2013. Overall expenses in the quarter stood at Rs 3,163.61 crore. In the second quarter of the previous year, the same stood at Rs 2,664.13 crore.
So how to trade it now?
According to Prabhudas Lilladher, Asian Paints' Q2FY15 results were below estimates due to higher ad spend and other expenses despite sustained double digit volume growth across segments. The brokerage has reduced FY15 and FY16 EPS estimates by 3-4 percent due to higher employee costs and other expenses.
However, it has increased target price to Rs 639 and upgraded rating from reduce to accumulate. "We remain positive on huge growth opportunity in decorative paints in India and ability of Asian Paints to capitalise on thesame due to strengths in distribution, branding and manufacturing. We estimate 22 percent PAT CAGR over FY14-17," it said in a note.
Dolat Capital also recommends accumulating with a target price of Rs 680. We introduce FY17 and estimate a 16.8 percent CAGR in revenue and 24 percent CAGR in earnings during FY14-17E. Expect strong PAT growth in the coming quarters, mainly due to lower base of last year and benign raw material cost," it said.
Posted by Nasrin Sultana
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