All paint majors had a good year in terms of demand thanks to the tax sops for the housing sector and the buoyant automobile industry growth. But one company stands out of its peers through its performance. Asian Paints Limited.
Asian Paints the market leader in the paint sector has led the show for the year ended FY00 both on the sales growth and bottomline. The company’s has outperformed the market with a 23% increase in sales (4.2% for ICI India, 15% for Goodlass Nerolac) volumes, a record for last 20 years. But the value growth was lower (18%) since prices were reduced twice during the year. The company is planning to declare a bonus issue at the rate of 3:5.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
Earnings per share*
The company’s bottomline has grown by 27% compared to Goodlass Nerolac’s 18% and ICI India’s 5%. The operating margin of the company has also improved from 14% to 17%, which is also healthier.
The company has targeted gross sales of Rs 2,100 m compared to the current sales of Rs 1,335 m by FY03. This seems to materialise taking into consideration the IT initiatives (ERP and SCM) taken by the company on the distribution front to minimise the cost on inventory and receivables. Though there were few hiccups on the reports of deficit rainfall, the southwest monsoon has not disappointed. The affected areas like Gujarat, Rajasthan and Andhra Pradesh are expected to see an average rainfall.
Perhaps, the only apprehension is the depreciation in rupee. If the crude prices remain at the same rate combined with the depreciation in rupee, the company may have to increase the prices of paints, which may affect the sales. If on the other hand the company were not to pass on the hike in costs, the markets would suffer.
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: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407