Asian Paint Vs Sherwin Williams - A global comparison - Views on News from Equitymaster

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  • Jun 22, 2000 - Asian Paint Vs Sherwin Williams - A global comparison

Asian Paint Vs Sherwin Williams - A global comparison

Jun 22, 2000

How does it look when a comparison is done between a domestic major who intends to go global, vis-a-vis a multinational giant with a $ 5 bn in revenues? So a comparison between Gattu and Sherwin.Asian Paints is the largest paint company in India with a turnover of Rs 13.3 bn in FY00. The company has a 44% market share in the decorative segment and an overall market share of 39%.

Sherwin-Williams Paints is engaged in the manufacture, distribution and sale of coatings and related products to industrial, commercial and retail consumers. The company's operations are organised into five segments: - the paints store, consumers, automotive finishes, international coatings and administrative segments.

Vis-a-vis...

  • Sherwin-Williams has yearly revenues exceeding $5 billion and is ranked among the top U.S. Fortune 500 companies, while setting standards of excellence within the coatings industry. Asian paints has a turnover of Rs 13.3 bn and it us ranked as the fourth most admired company across industries in India.
  • Asian Paints is basically a decorative paint company (it has a separate joint venture with PPG of USA for the automotive paint), whereas the former has products addressing various segments.
  • The Sherwin-Williams has more than 2,200 company-owned stores in 50 states and is the U.S. market leader in distribution and sales of coatings and coating-related products. Asian Paints has 15,000 strong dealer network throughout India.

Financials
FinancialsAsian PaintsSherwin-Williams
$ m (Re/US$=44)FY99FY99
Sales 240 5,004
Gross profit 28 2,249
Net Profit 17 304
EPS 0.4 1.6
CEPS 0.4 2.4
DPS 0.2 0.5
Gross profit margin11.7%44.9%

Sherwin Williams's turnover in 25 times that of Asian paints. The gross profit margin of Asian paints is half of the former company.

Some Key Ratios
On ratios front, Asian Paints seems to be giving better returns than the global major. The return on capital employed, for example, is 21% for Asian Paints in FY99 compared to 16% in FY99 for Sherwin. On the price to sales front Asian Paints does not seem to be accredited for its performance. But in other aspects, Sherwin is the clear winner.

Ratio AnalysisAsian PaintsSherwin-Williams
Return on Equity25%18%
Debt/Equity0.70.4
Price/Sales 0.04 0.70
Price/Cash Flow 16.1 7.7
Return on Capital Employed21.0%15.7%

Valuations
ValuationsAsian PaintsSherwin-Williams
Book Value/Share0.00710.25
Market Capitalisation 231 3,821
Market capitalisation/sales 1.0 0.8

Asian Paints plans to become one of the top five global paint companies in the world by FY07. Towards this, it is rapidly modifying its distribution network, installing more Colour Worlds and implementing latest technology to minimise its cost. Last year the company clocked a record turnover growth of 23% (in volumes) thanks to the buoyant growth in the housing sector. The company is expected to perform well given its ability to outperform its competitors and gain market share on a consistent basis. So, Gattu is finally going New York!

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