Asian Paints has reported a 8% rise in its net profits for the year FY02. The company reported a topline growth of 9%. While the topline has grown by nearly 11% YoY in the fourth quarter, the bottomline was however, down by nearly 4%. A higher tax rate of 40% has lowered bottomline in the fourth quarter.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share*
Paint sales (value terms) for the company recorded an 11.0% growth, while volume growth stood at 9.6%. In the paints segment, decorative coatings account for nearly 90% of the company's net sales while industrial coatings accounts for 3%. The company has clocked good growth in all product categories of the decorative segment. Infact, exterior segment recorded growth of more than 25%.
The company passed on the benefits of low raw material costs to the customers in the form of three price decreases during FY02. Despite the reduction in prices, Asian Paints managed to increase the operating margins by a marginal 0.3% to 16.9% in FY02. During the year the company incurred a capital expenditure of Rs 510 m. With a view to expand operations in the high growth powder coatings business, the company acquired Hawcoplast Chemicals for a total consideration of Rs 226 m.
New initiatives to reduce working capital and increase the productivity of assets and capital have generated considerable cash flows.The company was able to release nearly Rs 900 m from working capital. This cash was mainlly used to fund the acquisition and to retire debt. Consequently, interest costs of the company have reduced by nearly 34% to Rs 146 m. The reduction in working capital was achieved by longer credit period and lower inventory levels. To reduce the financial burden, Asian Paints roped in Citibank to fund the colour mixing machines at Colour World outlets. Depreciation burden on the company has increased due to setting up of a large number of Colour World outlets.
The company has provided Rs 63 m towards deferred taxation. Excluding this, the net profit has increased by 14.3% YoY.
The stock is currently trading at Rs 300 a P/E multiple of 17x the FY02 earnings. The company has declared a final dividend of 55% (interim dividend of 35%). Increased infrastructure spending and a healthy housing demand are likely to help the company maintain its topline. Higher crude prices will affect the raw material costs, putting pressure on the bottomline. Thrust on improved production norms, supply chain management and reduced overhead costs are likely to help the company maintain its operating margins going forward.
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407