ASIAN PAINTS
Reco price/date: Rs 3,619/July 23;
current/target price: Rs 3,598/Rs 3,340
Shocker in volume growth; Asian Paints doled out two per cent volume decline in the domestic decorative paints business in Q1FY13. Analysts do not ascribe to management theory of adverse base or inventory pile-up as reason for deceleration in volume growth. Analysts believe that demand slowdown is sole reason. Consolidated performance on weak side; reports revenues and adjusted net profit of Rs 2,550 crore and Rs 290 crore against expectation of Rs 2,810 crore and Rs 300 crore. Expect moderation in category volume growth alongside challenges to sustenance of Ebidta margins. Downgrade to Sell from Hold.
Emkay Global
BHARAT PETROLEUM CORPORATION
Reco price/date: Rs 383/July 23;
current/target price: Rs 376/Rs 390
Bharat Petroleum Corporation Ltd (BPCL) has been one of the best performing stocks this year (up 58 per cent year-to-date) on account of E&P successes and expected price reforms in diesel/cooking fuels post-presidential elections. However, Mozambique gas discoveries and the subsequent bidding ‘war’ between Shell and PTTEP over the acquisition of Cove Energy (8.5 per cent stake) have led to over-optimism on the find (and on valuations). Monetisation of the discovery is still six to seven years away and thus entails business/pricing risk. Religare’s NPV for BPCL’s Mozambique share stands at Rs 114 ($ 1.8 billion). Downgrade to Hold.
Religare Institutional Research