BUYsmartinvestor.business-standard.com/BSCMS/PDF/asian paints ltd.pdf · Asian Paints Limited ACMIIL 2 Paints Industry Paint is deﬁ ned as the group of emulsions, consisting of

Asian Paints Limited ACMIIL 1

Asian Paints Limited

AnalystChintan S. [email protected]: (022) 2858 3407

Key Data (INR)

CMP 1200.0

Target Price 1419.0

Key Data

Bloomberg Code APNT IN

Reuters Code ASPN.BO

BSE Code 500820

NSE Code ASIANPAINT

Face Value (INR) 10.0

Market Cap. (INR mn.) 113,372.6

52 Week High (INR) 1,319.95

52 Week Low (INR) 751.0

Avg. Daily Volume (6m) 41,654

Shareholding %

Promoters 49.3

Mutual Funds / UTI 2.0

Financial Institutions / Banks 0.1

Foreign Institutional Investors 15.0

Bodies Corporate 7.1

Individuals/Others 26.5

Total 100.0

FY07 FY08E FY09E FY10E

Revenues

(Rs. mn)

36,699.73 42,419.1 47,316.8 58,980.7

Sales

Growth (%)

21.5 15.6 11.5 24.70

Op. Profit

(Rs. mn)

4,780.8 6,320.4 7,523.4 9,525.4

OPM % 13.0 14.9 15.9 16.2

PAT (Rs.

mn)

2,804.4 3,927.7 4,629.4 5,942.7

EPS (Rs.) 29.3 40.7 48.0 61.7

15 April, 2008

B U Y

Introduction

Asian Paints Limited (APL) incorporated in 1942 ranks among the top ten decorative paint companies in the world. It has presence in decorative and industrial coating segment of the paint business. Besides, the Company operates around the world through its subsidiaries Berger International Limited, Apco Coatings and SCIB Chemicals. APL has its presence in almost all the segment through its brands Royale in the premium segment, Apcolite in the mid-segment, Gattu, Tractor, Utsav and 3-Mango etc. in the lower segment.

Investment Rationale

The Indian Paint Industry growing at 1.5 times the GDP growth. Assuming the country GDP grows @7.5% p.a, the Indian paint industry is expected to grow at a CAGR of 11.85% from Rs. 112 bn. in FY07 to Rs. 156.7 bn in FY10E.

In order to cater the incremental demand of the domestic paint industry, total capacity addition coming upstream in over the period of two year i.e. from FY08E to FY10E is around 255450 tonne. Out of this incremental supply around 82% will be contributed from APL resulting in increase in market share from 37% in FY07 to 42% in FY10E.

APL’s dominance in paint industry and presence across all segments will enable it to maintain the margins going forward.

Valuations

We expect the company to register a 3-year EPS CAGR of 28.2% from 29.3 in FY07 to 61.7 FY10E. At CMP of Rs. 1200.0 the stock is trading at 25.0x FY09E & 19.5x FY10E earnings per share. We initiate coverage on Asian Paints Ltd with a BUY recommendation and price-objective of Rs.1419 (implying a forward P/E multiple of 23x) on account of robust domestic demand for decorative paints.

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Paints Industry Paint is defi ned as the group of emulsions, consisting of pigments suspended in a liquid medium, for use as decorative or protective coatings. “Paint” ranges from the broad group of environmentally-sound latex paints used to decorate and protect homes and the translucent coatings that line the interior of food containers, to the chemically-complex, multi-component fi nishes that automobile manufacturers apply on the assembly line.

Market StructureThe size of the Indian paint industry is valued at ~Rs.112 bn . Indian Paints Industry can be classifi ed into two sub-segments:

Volume Share Value Share

Decorative Paints 90% 75%

Industrial Paints 10% 25%Source : Crisinfac

Size of Paint Industry is pegged at Rs. 112 bn.

(ACMIIL Research & Asian Paint Ltd. Annual Report FY07)

Source: ACMIIL Research


The paint industry is divided into organized and unorganized sector. The unorganized segment plays a huge role in decorative paint segment due to low technical know-how and highly scattered market. The organized segment constitutes around 54% of the total volume and 65% of value of paints industry. Again the whole paints industry can be classifi ed into decorative (75% of total industry size) and industrial paints (25% of total industry size). Further, in organized segment, the top 6 players account for around 84% by volume and 63% by value. The remaining players in organized business are largely present in non-auto industrial segment, and the unorganized players are mainly operational in decorative paints segment as industrial paints requires high technological know how and client tie-ups.

Demand Supply DynamicsThe Indian Paint Industry grew by 18% from Rs. 95 bn. in FY06 to Rs. 112 bn in FY07 (Source: Company). The industry has a positive correlation with GDP as both have same drivers for growth. Demand for paints is both, derived as well as direct. The demand for decorative paints is a direct demand whereas the demand for industrial paints is a derived demand.

Demand drivers for Paints IndustriesIncrease in Per capita consumption of paints: The per capita consumption of paints in developed countries is around 15-25 kgs and world average is around 15 kgs. Comparing this with domestic consumption, India’s contribution to world paint markets is 0.6% with per capita consumption of around 800-900 gms. Based on the expenditure in the construction activity and increase in the repaint activity coupled with industrial growth, the industry is expected to increase at a 11.85% CAGR over next three yearsIncrease in Real Estate Investments: The demand for decorative paints is directly related to the increase in the investment in the real estate thus increasing the cement area. Out of the total demand for decorative paints, around 30-40% of the demand comes from the fresh construction (Source: CrisInfac). The size of real estate industry is estimated to grow to Rs. 18,517 Bn, over next fi ve years period (Source: CrisInfac). Investment in real estate will be primarily led by housing, which is expected to account for nearly 90% of total investment in the sector (Source: Cris-Infac). India’s robust economic growth and resultant increase in income are speeding up the pace of urbanization.

In India, about three fourth (3/4) of real estate development is for residential use and balance one fourth (1/4) is predominantly for commercial use.

Total Construction Investment (Rs. Bn) 2001-02 to 2005-06 2006-07 to 2010-11P Implicit TAGR (%)

Real estate 10,218 18,517 12.6

Housing 9,810 17,338 12.1

Commercial real Estate 408 1,179 23.6

Source: Crisinfac

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Top six organised player accounts for 84% by volume

and 63% by value of total organised market

(Source: ACMIIL Research, Industry)

Paint industry grew by 18% as compared to last year

New real estate construction accounts for 30-40% for

demand for decorative paints


Housing investments (permanent, non-slum houses) are expected to grow at a TAGR of 12% over the next 5 years period.

On other hand, repainting activity which accounts for 70% of the decorative paint demand is also increasing, mainly due to increase in per capita income. The demand from the repainting activity has increased by 6-7 percent in last two year. Based on the expected investment in the housing, demand for paint is expected to increase at a CAGR of 12 percent over the next 5 years (source: CRISINFAC).

Increase in Industrial Paints: The industrial paint segment is divided into automotive industrial paints and non-automotive industrial paints. Increase in income levels of the consumers contributes towards the growth in the auto-segment and growth in the industrial segments like power, road and infrastructure leads to growth in the non-automotive segment. Along with these, growing needs for consumer durables and export opportunity for auto ancillaries will also contribute towards the growth of industrial paints.

Increase in Per Capita Income: The above mentioned increase in demand for paints is backed well by increase in per capita income. Due to increase in disposable income, Indian consumer is expected to shift from lime wash to paints and those already consuming paints would move up the value chain. On other hand, the increasing capacity would also drive automotive and consumer durable, thereby increasing the consumption of industrial paints.

Prices in line with substitute product: Large scale of operations and technical know-how have helped prices of paints to come down. They are now in line with those of substitute products like lime wash, distemper etc., manufactured by local players. This gives consumers the incentive to shift from lime to paints.

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Increase in per capita income will lead to increase in repaint

activity

(Source: MGI Report)


Supply Side

The major players that control the organized sector are shown in the above diagram. The dynamics that control the supply side scenario are:DistributionIn case of industrial paints, distribution network doesn’t play an important role, whereas the situation is totally different in case of the decorative paints. India being a wide and scattered market having a large distribution network becomes prime requirement for any company in decorative paints business. Outsourcing:The organized players in the decorative paint segment have to compete directly with those in the unorganized sector manufacturing low cost paints like distemper and enamels. In-order to face this competition organize players outsource small part of their production (25-30%). Import Scenario:Indian climatic conditions are not conducive for foreign formulations and modifi cation cost in product formulation is quite high. As a result, imports are no threat to the Indian players. In case of industrial paints, most of the major players in the industry already have a tie-up with global players, for latest technology and markets accessible to them. It negates the further supply from the international markets even after reduction of import duty from 40% to 15.3% in last 8 years.

Source: ACMIIL Research, Capitaline

Decorative paints requires wider distribution network as compared to industrial paints

Due to conducive climatic condition imports are no threat

to Indian players


Manufacturing Process

Cost StructureThe paint industry is raw material intensive industry. It takes around 300 different raw materials to make paint, most of which are petroleum based. These raw materials can be divided into three broad categories as shown in the chart below:

Titanium Dioxide (TiO2) is the largest consumed raw material for manufacture of paints. It constitutes around 30% of the total manufacturing cost. TiO2 is available in two grade i.e. rutile (imported and mainly used by the Indian paint industry) and anatase (manufactured domestically). Besides TiO2, there are other petroleum based raw materials which constitute around 40-50% of total raw material consumed. Hence any movement in crude oil prices will impact the profi tability of the company.

TiO2 constitutes around 30% of

total manufacturing cost

Petroleum products accounts for 40-50% of total raw material

cost




COMPANY PROFILEAsian Paints India Ltd.Asian Paints, incorporated in 1942, is India’s largest paint company and the third largest paint company in Asia (Source: Crisil). The company currently operates in 21 countries has 29 paint manufacturing facilities all over the world and is servicing consumers in over 65 countries. Apart from Indian operations, the group operates around the world through its subsidiaries Berger International Limited, Apco Coatings, SCIB Paints and Taubmans.

Asian Paints Ltd.Asian Paints Ltd. (APL) is involved in the manufacturing of decorative paints and chemical business i.e. Phthalic Anhydride and Pentaerythritol. The decorative & chemical business contributes together contributes 77% of the total consolidated revenue. Asian PPG Ltd.Asian PPG Ltd. handles the automotive and industrial paints business. It was incorporated in year 1997, as a 50:50 Joint Venture between Asian Paints Ltd., and Pittsburgh Paints and Glass Industries (PPG), USA. The JV was formed primarily to obtain Cathodic Electro Deposition (CED) technology, later the whole auto furnish business of PPG’s Indian operation was transferred to the JV. After acquisition of ICI India’s 2k auto furnishes business, the company has become the largest player in this segment in the domestic market.Asian Paints Industrial Coating Ltd. (APICL)Asian Paints Industrial Coatings Ltd. (APICL), wholly-owned subsidiary of the company handles powder coating business. APCIL has tied up with Protech Chemicals, one of the top ten powder coating companies in the world, for obtaining technological know-how for powder coatings. Currently, the company ranks as third largest player in this segment. Besides the company also started is operations in Protective Coatings, Road Markings, Floor Coatings and General Industrial Liquid Paints.


Largest paint company in the country and third largest in

Asia


International Operations

Asian Paints operates in 22 countries across the world. The company is one of the largest paint companies in world and has manufacturing division at each of its location. Asian Paints operates in fi ve regions across the world viz. South Asia, South East Asia, South Pacifi c, Middle East and Caribbean region through the four corporate brands viz. Asian Paints, Berger International, SCIB Paints and Apco Coatings. Segment

APL’s whole business operation can be divided into two segments i.e. Paints and Chemicals.


Paint SegmentThis is the primary business of the company. Out of the total revenue earned by the group 97% is generated from this segment.

Decorative Paints: Decorative Paints business contributes around 94% in the total paint business. The company ranks no. 1, in the country in this segment with around 8500 colours to offer to its customers. It has 5 manufacturing plants operating all over the country, which is strategically located in-order to cater to the widely spread, market:

Plant Installed Capacity

Bhandup, Mumbai 30,000 kl p.a

Ankleshwar, Gujarat 100,000 kl p.a

Patancheru, Hyderabad 80,000 kl p.a

Kasna, Noida – UP 80,000 kl p.a

Sriperumbudur – Chennai 50,000 kl p.a

Total 340,000 kl p.aSource: Company

In Decorative paint segment, the Company operates in 4 main segments i.e. interior wall fi nish, Exterior wall fi nish, Enamels and Wood Finishes. Besides, the company outsources around 25-30% of its total production.Industrial Paint Segment:- In this business, the company caters to automotive, powder, protective coatings, road markings segment, fl oor coatings and General Industrial Paints. Most of the industrial paints business is operated by two companies’ viz. Asian PPG Ltd. and Asian Paints Industrial Coating Ltd. The company ranks fi rst in the automotive paints business in domestic market. The company ranks second in protective segment and fi rst in the road-marking segment. Recently it has entered in fl oor coating segment. The company operates through following plants:

Industrial Coatings

Automotive Coating 14,000 kl

Non-Industrial Coatings

Powder Coating

-Baddi, Himachal Pradesh

-Sarigam, Gujarat

1800 MT

3600 MTSource: Company

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(Source: Company)

8500 ranges of colour to offer


Chemicals: Chemical business includes manufacturing of Phthalic Anhydride (PAN) and Pentaerythritol (PENTA). APL has its PAN manufacturing plant at Gujarat (capacity – 25,200 MT) and PENTA manufacturing facility at Tamil Nadu (capacity – 3000 MT). The company consumes nearly 50% of its production as captive consumption and sells the remaining in the open market. This business contributes around 3% to company’s consolidated revenues.

Investment Rationale

High Growth in Industry

As seen from the graph, the Indian paint industry is expected to grow at a CAGR of 11.85% from Rs. 112 bn. in FY07 to Rs. 156.7 bn. in FY10E, Assuming the country GDP grows @7.5% p.a. and the Indian Paint Industry growing at 1.5 times the GDP growth.

Capex Plans

Company Name Capex Plan Completion Period

1. Asian Paints Increasing the capacity by setting up plant at Rohtak, Haryana 150,000 tonne capacity being added in FY10 and subsequent

quantity will be added later in phase manner.

2. Kansai Nerolac

Paints Ltd.

The board has passed a resolution of setting up new plant worth Rs.690

mn. with capacity of 24,000 mt. Besides this company also announced two

brownfield projects with total capex of Rs.1000 mn. brownfield projects.

Work for the same has not been started, but is expected to be operational

by FY10E of this one project was already completed last year. This year

additional capacity of 10,200 tonnes would be coming.

3. Berger Paints N.A. N.A.

4. Shalimar Plans to increase the capacity by 25% from current 45,000 tonnes has

identified 4 companies as acquisition targets.

N.A.

With its capex plan company’s installed capacity is expected to be 560,000 tonnes in FY10E. with such plan APL is set to capture the major portion of demand .

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50% of chemicals are used for captive consumption

Indian Paint industry will grow 1.5 time the GDP growth

(Source: ACMIIL Research)


Increase in market share

With no signifi cant capacity addition by other players in the industry, Asian Paints gets ample opportunity to cater to the incremental demand, thereby increasing its market share as shown below:-

Manufacturing capacity and volume: The industry being price sensitive the company’s growth is mainly driven by volume sales.

APL has the highest volume sales among the top 7 players in the industry with a market share of around 37%. Thus, huge volumes and high utilization levels gives company ample capacity to capture new opportunities in the paint industry and favorable market share.

APL is currently the market leader with approximately 50% of the total manufacturing capacity. No other major capacity additions are expected from other players apart from APL, hence substantial portion of demand has to be catered by APL. This will give company a competitive advantage in terms of pricing.

APL has low debt-equity ratio of 0.4. Hence the company is in position to raise additional debt and expand further. Further expansion would increase

Presence in Niche Segment

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Huge volumes and high utilisation level will help in gaining favourable market

share


Asian Paints Ltd Berger Paints Kansai Nerolac ICI India Shalimar Paints

Emulsions

Premium √ √ √ √ √

Medium √ √ √ √ √

Economy √ √ √

Distemper

Premium √ √ √ √

Economy √ √ √ √

Enamels


1st and 2nd quality √ √ √ only in 2nd quality

Exterior


Medium √ √ √ √ √

Economy √ √

Cement Based √ √ √ √

Auto refinish √ √ √ √

Powder Coatings √ √ √ √

Wood Finish √ √ √ √


As we see that most of the player are present in all the segments of paints, APL has presence in niche and medium range brands. This results in better realization and higher margins.International Presence: The Company has a good international presence with operation in around 22 countries.

Presence in high and medium brands


High Proximity to Dealer

Asian Paints Berger Paints Kansai Nerolacs Shalimar Paints ICI India

Sales (Rs. In Mn) 36,699.7 12,196.5 12,223.8 2560.5 10130

Raw Material Cost (% to Net sales) 59.9% 59.7% 62.0% 66.32% 58.0%

Sales & Administration Cost (% to Net Sales) 15.1% 9.6% 18.9% 21.30% 17.2%

Other Expenses (% to Net Sales) 14.2% 21.0% 8.2% 9.65% 16.1%Source: Capitaline

Because of higher volume, Asian Paints Ltd. attains signifi cant economies of scale refl ected through lower sales and administration cost.

Asian Paints Kansai Nerolacs Berger Paints Shalimar Paints ICI India

No of Distribution 19000 11000 12000 6000 N.A.

Sales contribution per

dealer (Rs. in Mn.)

1.93 1.11 1.02 0.43 N.A.

Plant Locations - Bhandup, Maharashtra- Ankleshwar,

Gujarat- Patancher u, Andhra

Pradesh- Kasna, U.P.- Sriperumbudur

– Chennai- Baddi, Himachal Pradesh-

Sarigam, Gujarat

- Howrah, W.B.

- Pond icher r y,

Kerala - Goa -

Rishra, - Jammu

- Arinso

- Lote, Maharashtra -

Jainpur, U.P - Vatva,

Gujarat - Chennai,

T. N . - B a w a l ,

Haryana

- Howrah, West

Bengal - Nasik,

M a h a r a s h t r a -

Sikandrabad, Delhi

- Mohali, Punjab -

Hyderabad, Andhra

Pradesh - Rudrapur,

Uttaranchal

Total Installed Capacity 354,000 MT 161,100 MT 157,946 MT 70,204 MT 163,500 MT

Source: Capitaline, company websitesAPL’s plants are geographically widespread over the country. Such widespread production network enables APL to reach maximum number of dealer’s which in turn leads to high market penetration. This can be evident from the table above where APL has the 19000 dealers, which are higher than any other domestic player. This also enables APL to manage its inventory considerably effi ciently amongst peers.

Inventory (x) Debtors (x) Creditors (x)

Asian Paints 59 41 62

Berger Paints (no of days) 81 46 63

Kansai Nerolacs 54 56 46

ICI India 48 60 85Source: Capitaline

The Company also has a short and effi cient chain of distribution. The overview of APL’s supply chain is as follows:

New Product launch: New product development is very important in paint industry in order to cater to the changing taste of the consumer. APL launches new product every two – three years. Besides, the company also has a concept called ColourNext, Kids World, and Royale Play which help to attract customers.

Home solution & colour world: Asian paints have a customer centric approach to business. The Company started with two concepts namely Home Solutions and Colour World. APL is the world fi rst company that has started providing painting services. The home solution service works as follows:

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Wide Network leads to high market penetration



By this service the company also gets in touch with the customer and gets fi rst hand information regarding the changing taste and consumer preference before the competitors does. This service is currently operating in 12 cities all over the countries. A “Colour World” service offered by the company provides around 8500 shades and an entire range of products from interior to exterior paints, giving customer a one stop solution. Thus, both the above service not only provided products to the customer but also with value added services and initiatives.

Continuous Research & Development: Extensive research & development has enabled APL to launch innovative products

The company carries out R&D process through two ways i.e. a) Customer Approach and b) Company Approach. Besides this the R&D facility also helps the company in improving the internal effi ciency of the company.

Risk

Industry Growth: Growth in paint industry is dependent on two activities (a) repaint activity and (b) construction industry. Repaint activity which constitutes around 60-70% of the total decorative paint and remaining by fresh construction. Both the activities are dependent upon the GDP growth and per capita income growth. The demand for industrial paints will also be hampered if GDP growth slowsdown due to slower industrial activity. Any slow down in growth rate of any of the above factors will have direct impact on the volume of APL, thus effecting its profi tability and margins.

Low Entry barrier: Setting up new facility requires low capex making the players more vulnerable to increase in competition APL has the major threat from the new entrant. Due to very capital requirement for setting up a new plant, the company faces a constant threat from new player entry in the market.

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R&D leads to innovative products




Socio-Cultural Risk in International Market: APL’s 18% of revenue comes from the international business, spread across 22 countries all over the world. Thus creating a cultural risk for the company in those regions. Any change in the taste and consumption pattern in these countries will impact the company’s revenues and profi ts.

Increase in Raw Material Prices: As the major raw material for manufacturing paint is PAN and PENTA, the company is directly exposed to changes in the crude oil price movement.

SWOT ANALYSIS OF ASIAN PAINTS LTD.

Peer Comparison FY07

Sales Turnover

(Rs. in mn)

PBIDTM (%) PATM (%) ROCE (%) RONW (%)

Asian Paints 36,699.7 14.0 7.6 45.3 37.8

Berger Paints 11652.9 9.8 6.3 34.0 33.1

Kansai Nerolac 12259.8 13.2 7.3 28.5 23.5

Source: Capitaline



Financials

Revenue

The Company’s revenue is expected to grow at a CAGR of 18.5% from Rs. 39,781 mn. in FY07 to Rs. 66,270.43 mn in FY10E, mainly due to capactiy addition and better realisations.

Margins

In FY08E, the company was able to pass on the increase in the raw material cost which helped the company to sustain in its raw material cost as a percentage to net sale. Further, the increase in volume led to economies of scale resulting in better operating margins.

APL’s net profi t margins are in line with EBIDTA margins and are expected to grow at a 28.2% CAGR from Rs. 2,810.3 mn. in FY07 to Rs. 5,916.4 mn. in FY10E. Hence, EPS is expected to grow at a CAGR of 28.2% from Rs. 29.30 in FY07 to Rs. 61.7 in FY10E.

Valuations & Recommendation

We expect the company to register a 3-year EPS CAGR of 28.2% till FY10E. At CMP of Rs. 1200.0 the stock is trading at 25.0x FY09E & 19.5x FY10E earnings per share. We initiate coverage on Asian Paints Ltd with a BUY recommendation and price-objective of Rs.1419 (implying a forward P/E multiple of 23x) on account of robust domestic demand for decorative paints.

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Increase in capacity leading to higher top line

Better realisation and economies of scale leading to

increase in margins


Profit & Loss Account Rs. In Mn.

Particulars FY05 FY06 FY07 FY08E FY09E FY10E

Net Sales 25,605.2 30,210.3 36,699.7 42,419.1 47,316.7 58,980.7

Total Expenditure 22,253.9 26,293.4 31,918.9 36,098.7 39,793.4 49,455.3

Operating Profits 3,351.3 3,917.0 4,780.8 6,320.4 7,523.4 9,525.4

Other Income 323.7 320.2 372.5 424.2 473.2 589.8

EBDITA 3,675.0 4,237.2 5,153.3 6,744.6 7,996.5 10,115.2

Depreciation 613.6 606.2 611.4 603.3 754.6 913.2

EBIT 3,061.4 3,631.0 4,541.9 6,141.3 7,242.0 9,202.0

Interest 108.2 114.3 189.1 190.2 227.8 198.0

PBT 2,878.3 3,431.5 4,271.2 5,951.1 7,014.1 9,004.0

Taxes 1,060.8 1,322.9 1,466.8 2,023.4 2,384.8 3,061.4

PAT 1,817.5 2,108.6 2,804.4 3,927.7 4,629.4 5,942.7

Growth in sales (%) 15.4% 18.0% 21.5% 15.6% 11.5% 24.7%

EBIDTA Growth (%) 13.6% 15.3% 21.6% 30.9% 18.6% 26.5%

PAT Growth (%) 20.2% 21.9% 32.5% 39.0% 17.9% 28.4%

Operating Profit Margin 13.1% 13.0% 13.0% 14.9% 15.9% 16.2%

Net Profit Margin 7.1% 7.0% 7.6% 9.3% 9.8% 10.1%(Source: ACMIIL Research)

Balance Sheet Rs. In Mn.

FY05 FY06 FY07 FY08E FY09E FY10E

Sources of Funds

Share Capital 959.2 959.2 959.2 959.2 959.2 959.2

Reserves and Surplus 4,712.5 5,503.3 6,818.7 9,436.7 12,374.2 16,253.2

Total Shareholders Funds 5,671.7 6,462.5 7,777.9 10,395.9 13,333.4 17,212.4

Total Loan Funds 2,395.0 2,612.8 3,061.8 3,170.0 3,400.0 3,300.0

Minority Interest 638.5 600.3 600.7 621.3 644.2 670.5

Net Deferred Tax Liability 353.3 340.7 267.9 250.0 278.0 436.9

Total Capital Employed 9,058.7 10,016.3 11,708.3 14,437.2 17,655.6 21,619.8

Application of Funds

Gross Block 9,363.8 9,765.6 10,831.5 10,969.3 13,719.3 15,219.3

Less: Accumulated Depreciation 5,090.9 5,584.4 6,037.7 6,641.0 7,395.5 8,308.7

Net Block 4,272.8 4,181.1 4,793.8 4,328.3 6,323.8 6,910.6

Capital Work in Progress 96.7 337.4 137.8 2,750.0 1,500.0 1,428.5

Goodwill on Consolidation 500.1 448.7 468.9 468.6 468.6 468.6

Investments 1138.4 1640.6 1927.2 2274.7 3428.6 4497.2

Net Current Assets 3,050.6 3,408.5 4,380.6 4,615.6 5,934.5 8,314.8

Total Assets 9,058.7 10,016.3 11,708.3 14,437.3 17,655.6 21,619.8(Source: ACMIIL Research)


Cash flow Statement Rs. In Mn.


Pre tax profit 2,878.4 3,431.5 4,271.2 5,951.1 7,014.1 9,004.0

Add

Depreciation 613.6 606.2 611.4 603.3 754.6 913.2

Interest Exp 97.7 96.7 174.8 190.2 227.8 198.0

Profit before working capital changes 3,468.3 4,146.2 5,034.4 6,744.6 7,996.5 10,115.2

Cash generated from Operations 2,024.6 3,259.9 4,281.7 6,191.6 6,127.0 8,010.0

Less Taxes -957.5 -1,473.1 -1,585.0 1,600.0 1,800.0 2,200.0

Net Cash flow from operating activities 1,067.2 1,786.8 2,696.7 4,591.6 4,327.0 5,810.0

Net Cash flow from investment activities -738.5 -1,250.3 -1,212.2 -3,097.5 -2,654.0 -2,497.0

Net Cash flow from financing activities -418.5 -415.7 -1,107.6 -1,391.7 -1,689.7 -2,361.6

Net increase /(decrease) in cash -89.8 125.9 319.9 45.4 -73.6 924.3

Op. balance of cash and cash equivalents 698.0 608.2 734.1 1,054.0 1,099.3 1,025.7

Cl. balance of cash and cash equivalents 608.2 734.1 1,054.0 1,099.3 1,025.7 1,950.0(Source: ACMIIL Research)

Profitability Ratios


Operating Profit Margin (%) 13.1% 13.0% 13.0% 14.9% 15.9% 16.2%

EBDITA Margin (%) 14.4% 14.0% 14.0% 15.9% 16.9% 17.2%

PAT Margin (%) 7.1% 7.0% 7.6% 9.3% 9.8% 10.1%

RONW (%) 32.0% 32.6% 36.1% 37.8% 34.7% 34.5%

ROCE (%) 38.0% 40.0% 41.9% 45.3% 43.3% 44.9%

Per Share Ratios

EPS (Rs.) 18.1 22.1 29.3 40.7 48.0 61.7

CEPS (Rs.) 25.3 28.3 35.6 47.2 56.1 71.5

BV Per Share (Rs.) 94.4 104.4 122.1 150.5 184.1 225.4

Valuation Ratios

P/E (x) 63.5 52.1 39.3 28.3 24.0 18.7

P/CEPS (x) 45.5 40.7 32.4 24.4 20.5 16.1

P/BV (x) 12.2 11.0 9.4 7.7 6.3 5.1

Capital Structure Ratios

Debt/Equity 0.4 0.4 0.4 0.3 0.3 0.2

Current Ratio 1.5 1.5 1.5 1.5 1.5 1.6

Turnover Ratios

Inventory Turnover (no of days) 64.8 59.1 59.5 60.0 63.0 63.0

Debtors turnover ratio (no of days) 42.2 42.0 41.8 42.0 45.0 45.0

Fixed Asset Turnover (x) 2.7 3.1 3.4 3.9 3.4 3.9(Source: ACMIIL Research)


Disclaimer:

This report is based on information that we consider reliable, but we do not represent that it is accurate or complete and it should not be relied upon such. ACMIIL or

any of its affi liates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information

contained in the report. ACMIIL and/or its affi liates and/or employees may have interests/positions, fi nancial or otherwise in the securities mentioned in this report.

To enhance transparency we have incorporated a Disclosure of Interest Statement in this document. This should however not be treated as endorsement of the views

expressed in the report

Disclosure of Interest Asian Paints Limited

1. Analyst ownership of the stock NO

2. Broking Relationship with the company covered NO

3. Investment Banking relationship with the company covered NO

4. Discretionary Portfolio Management Services NO

This document has been prepared by the Research Desk of Asit C Mehta Investment Interrmediates Ltd. and is meant for use of the recipient only and is not for

circulation. This document is not to be reported or copied or made available to others. It should not be considered as an offer to sell or a solicitation to buy any security.

The information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such. We

may from time to time have positions in and buy and sell securities referred to herein.

Notes:

HNI Sales:Raju Mewawalla, Tel: +91 22 2858 3220

Institutional Sales:Bharat Patel, Tel: +91 22 2858 3732

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