X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Paints: Mixed fortunes - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Mar 5, 2002

    Paints: Mixed fortunes

    In line with the long-term objective of bringing down the customs duty in line with WTO requirements and Asian countries, the Finance Minister lowered peak customs duty from 35% to 30% in the recent budget. While this could have a significant impact on commodity sector, some sectors are expected to benefit from it. The paint sector is one amongst them. But how far will be the benefit for the paint manufacturers?

    A closer look at the raw material schedule of paint manufacturers like Asian Paints, Goodlass and Berger reveals the picture. Raw material costs as a percentage of sales accounted for more than 50% and as a percentage of total operating expenses, it is as high as 70%. Though crude prices still remain the largest determinant on raw material costs, the lowering of customs duty augurs well for the paint sector. Just to put things in perspective, total imports as a percentage of raw material costs accounted for 83% in FY01. Assuming a 35% customs duty on total imports of Rs 5,783 m, outflow as customs duty works out to Rs 1,499 m. After considering a 30% customs duty, outflow is Rs 1,334 m. Net savings, as a result of a fall in customs duty, is Rs 165 m, 2% of total expenses. Though the calculations are based on FY01 figures, the impact is on the positive side.

    Raw material costs at a glance…
    (Rs m) FY97 FY98 FY99 FY00 FY01
    Asian Paints 4,585 4,876 5,488 6,329 6,958
    % of sales 51.9% 51.4% 52.0% 51.0% 50.2%
    Goodlass 2,267 2,387 2,653 3,208 3,428
    % of sales 50.7% 50.5% 50.3% 53.0% 52.5%
    Berger 1,691 1,862 2,337 2,792 3,119
    % of sales 63.1% 62.1% 63.9% 63.7% 63.6%

    But this should not viewed in isolation. Rupee has also depreciated over the last few months and this, to a certain extent, could negate the fall in customs duty. Though crude prices have remained weak in the current fiscal in light of slowdown in all the major economies despite the output cut by the OPEC, there could be a upward revision in the coming months. Customs duty rate cut also mean cheaper imports, which could exercise a downward pressure on realisations.

    Apart from the lowering of the customs duty, there is not much for the paint sector in the budget. While interest rates on housing finance loans might fall, reduction of Section 88 benefit and dividend tax at the receivers end are likely to affect consumer sentiment. The government has promised higher allocation towards planned expenditure in the coming fiscal toward infrastructure and agriculture. However, going by the past track record of the government, this is far from convincing. Paint industry growth fell from around 12% in FY01 to 7%-8% in FY02. Though we expect the industry to grow at a higher rate in the coming fiscal, the growth potential is being limited on account of various structural bottlenecks.

     

     

    Equitymaster requests your view! Post a comment on "Paints: Mixed fortunes". Click here!

      
     

    More Views on News

    Asian Paints: Destocking Ahead of GST Impair Sales Volumes (Quarterly Results Update - Detailed)

    Aug 17, 2017

    Asian Paints registers 20.1% YoY decline in profits during 1QFY18 with low single-digit volume growth in the decorative paints segment.

    Asian Paints: Good Performance Across Segments (Quarterly Results Update - Detailed)

    May 18, 2017

    Asian Paints registers 10.4% YoY growth in profits during 4QFY17 with double-digit volume growth in the decorative segment.

    Asian Paints: Volumes Weighed by Notebandi (Quarterly Results Update - Detailed)

    Feb 17, 2017

    Asian Paints has reported a 2.6% YoY increase in the topline and a 0.6% YoY decline in the bottomline during the quarter.

    Asian Paints: Prolonged Monsoon Impacts Volume (Quarterly Results Update - Detailed)

    Oct 28, 2016

    Asian Paints has reported a 10.2% YoY increase in the topline while the bottomline has grown by 18% YoY

    Asian Paints: A Robust Performance (Quarterly Results Update - Detailed)

    Aug 3, 2016

    Asian Paints has reported a 9.1% YoY increase in the topline while the bottomline has grown by 17.9% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ASIAN PAINTS SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK ASIAN PAINTS

    • Track your investment in ASIAN PAINTS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    ASIAN PAINTS - KANSAI NEROLAC COMPARISON

    Compare Company With Charts

    COMPARE ASIAN PAINTS WITH

    MARKET STATS