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Asian Paints: Margins expand

Feb 1, 2001

Asian Paints has reported a marginal 4% rise in sales for the third quarter ended 31st December 2000 to Rs 3,136 m. Sales for the first nine months of the current year, however, has gone up by 13.5% to Rs 9,113 m. The slowdown in sales was expected as demand for paints remained sluggish during the quarter due to the advancement of the festive season in the second quarter.

(Rs m) 3QFY00 3QFY01 Change
Sales 3,018 3,136 3.9%
Other Income 32 54 66.0%
Expenditure 2,578 2,661 3.2%
Operating Profit (EBDIT) 440 475 8.0%
Operating Profit Margin (%) 14.6% 15.2%  
Interest 55 62 11.0%
Depreciation 75 83 10.5%
Profit before Tax 342 384 12.5%
Tax 109 128 16.9%
Profit after Tax/(Loss) 232 257 10.4%
Net profit margin (%) 7.7% 8.2%  
No. of Shares (eoy) (m) 64.2 64.2  
Diluted number of shares 64.2 64.2  
Earnings per share* 14.5 16.0  

Other income has gone up by 52% to Rs 121 m for the first nine months of the current year. This could be attributed towards higher royalty income (dealer have to pay a fixed royalty for the installation of dealer tinting machines supplied by the company).

Operating profit has also increased by 8% to Rs 475 m backed by expansion in operating margins from 14.6% in 3QFY00 to 15.2% in 3QFY01. Though raw material costs as a percentage of gross sales has gone up from 43% in 3QFY00 to 44% in 3QFY01, the company has pruned its expenses. The company has also increased paint prices marginally during the third quarter to offset the rise in basic raw material prices.

The stock is trading at Rs 262 at a P/E multiple of 16.8x the annualised nine months earnings. On the annualised sales of Rs 12,150 m, market capitalisation to sales works out to 1.3 times (market capitalisation is Rs 16,818 m).

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