Asian Paints is ranked as the tenth largest decorative coatings company in the world. It is India's largest paint company and commands an estimated market share of 36% (FY03). The company has posted a 10% rise in revenues in the first quarter FY04. However, net profit growth was stagnant.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Earnings per share (Rs)*
The revenues include income arising out of processing charges for products manufactured for its joint venture, Asian PPG Industries Ltd., as well as its wholly owned subsidiary, Asian Paints Industrial Coatings Ltd. Also included in the above are lease rentals received on account of certain equipments (Rs 64 m). Certain discounts which were earlier included in sales have been accounted as overhead expenses due to which sales are up by Rs 221 m (196 m for 1QFY03).
Operating margins have shown a decline of almost 2.5% YoY. This drop in operating margins is due to a rise in raw material and packing expenses by 18% YoY. Raw materials as a percentage of revenues shot up from 52% in 1QFY03 to over 56% in the current June quarter. The rise seems largely on account of strength in crude prices vis-a-vis last year. Titanium dioxide is a key material for paint companies, prices of which are directly linked to the crude prices. In additon, an under performance by the company's chemical division was largely responsible for the stagnant growth in profits.
Interest expense has reduced to half. This along with a significant 55% growth in other income has helped the company maintain its net profits. The company declared a bonus of 1:2 in May 03 which has been approved in the general meeting held recently. The enhanced share capital after the allotment of bonus shares would stand at 96.28 m shares.
The stock is currently trading at Rs 403 implying a P/E multiple of 23x its1QFY04 annualised earnings. Though the company's first quarter performance has been rather lacklustre in terms of bottomline growth, the topline growth trend is likely to continue for the rest of the year. Moreover, a GDP growth expectation of 6.5% in FY04 is a good sign for Asian Paints.
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