MOSL: ASIAN PAINTS (Neutral)-Domestic decorative delivers 10% volume growth-EBITDA in-line

​Asian Paints: Domestic decorative delivers 10% volume growth; EBITDA in-line

(APNT IN, Mkt Cap USD17.2b, CMP INR1168, TP INR1210, 4% Upside, Neutral)

• Asian Paints reported consol. sales growth of 7.8% YoY (est. of +4%) to INR39.5b (Ind-AS), with volumes growth of ~10% (est. of +3%) in the domestic decorative paints business. Base quarter was unfavorable with 13% volume growth, and thus, the sales and volume performance was commendable.
  
• Gross margin contracted 150bp YoY to 43.8% (in-line), led by high raw material costs. EBITDA grew 2.1% YoY to INR7.12b (in-line), with the margin down 100bp YoY (est. of -20bp) to 18% on an increase in raw material cost and slightly higher other expenses (+10bp YoY), partially offset by lower staff costs (-60bp). Higher other income of INR701m (+47% YoY) led to PAT growth of 10.1% YoY to INR4.8b (1.9% below estimate).
  
• Standalone performance: S/A net sales grew 9.4% YoY to INR33.2b. Gross margin contracted 160bp YoY to 44.5%, while EBITDA margin shrunk 110bp YoY to 20.4%. EBITDA grew 3.4% YoY to INR6.4b, while adj. PAT increased 9.9% YoY to INR4.4b.
  
• Subsidiary sales were flat for 4QFY17, while EBITDA declined by 8%.
  
• FY17 performance: Consol. revenue, EBITDA and adj. PAT grew 7.1%, 9.1% and 8.7%, respectively. EBITDA margin expanded 40bp YoY to 19.8%.