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Asian Paints: Impressive performance - Views on News from Equitymaster
 
 
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  • Jul 23, 2001

    Asian Paints: Impressive performance

    Asian Paints has posted an impressive 9.7% growth in sales to Rs 2,738 m in 1QFY02. This is a commendable performance in light of lacklustre demand scenario and slowing industrial production.

    (Rs m) 1QFY01 1QFY02 Change
    Sales 2,495 2,738 9.7%
    Other Income 30 53 74.9%
    Expenditure 2,119 2,339 10.4%
    Operating Profit (EBDIT) 376 400 6.2%
    Operating Profit Margin (%) 15.1% 14.6%  
    Interest 51 47 -8.4%
    Depreciation 80 93 17.5%
    Profit before Tax 276 312 13.2%
    Tax 91 100 9.5%
    Profit after Tax/(Loss) 185 212 15.0%
    Net profit margin (%) 7.4% 7.7%  
    No. of Shares (eoy) (m) 64.2 64.2  
    Diluted number of shares 64.2 64.2  
    Earnings per share (Rs) 11.5 13.2  

    The growth in sales is higher than expected as it also includes processing charges received/receivable from the joint venture unit, Asian PPG Industries. Operating profit has gone up only by 6.2% to Rs 400 m due to a 50 basis points fall in operating margins to 14.6% in the aforesaid quarter. It should be noted that paint companies generally witness a drop in margins in the first half but it is compensated during the festive season. However, lower interest expenses and higher other income has led to a higher net profit. Net profit in 1QFY02 has gone up by 15% to Rs 212 m. The rise in other income was primarily on account of higher lease rentals from dealer tinting machines.

    The results are in line with our expectation barring a higher growth in sales. Both margins and topline are expected to grow at a faster rate in the second half as the festive season in the current year falls in the third quarter. Besides, if the estimates of a normal monsoons come true, prospects are indeed very promising.

    The scrip is currently trading at Rs 246 at a P/E multiple of 18.6x the annualised 1QFY02 earnings. On the expected sales of Rs 13,492 m in FY02, the market capitalisation to sales works out to 1.2 times (market capitalisation is Rs 15,793 m).

     

     

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