Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Asian Paints: Analyst meet notes - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 27, 2002

    Asian Paints: Analyst meet notes

    Asian Paints had an analyst meet yesterday to detail out the company’s international growth strategy. The growth strategy includes introducing new products and increasing market share. We would also like to focus on recent acquisitions by the company viz. Berger International, Singapore and SCIB (Egypt), in this article. While Asian Paints, on a standalone basis, has performed well in 1HFY03, the acquisition of Berger International and SCIB, Egypt has taken the company to a new league.

    One of the key objectives of Asian Paints, as far as the international operations are concerned, is that the focus in primarily on developing economies and SAARC countries. There are some pros and cons. For one, like India, per capital consumption in most of such countries are significantly lower than international average. To put things in perspective, consumption is as low as 2 kgs and 1 kg in Egypt and China as against more than 22 kgs in developed economies. Secondly, competition is lower from MNCs like Sherwin Williams and Kansai in such markets, which makes it ideal for Asian Paints to grow at a faster clip. However, as experienced in select Carribean nations like Fiji and other parts like Sri Lanka, local unrest (primarily political) is a big cause of concern. Also, Asian Paints is now exposed to currency risk as well. Remember South East Asian crisis in mid 1990s.

    The first acquisition, SCIB Chemicals S.A.E, Egypt, is one of the top five paint companies in Egypt. The acquisition for a 60% stake in the company was made at a consideration of US$ 5 m (Rs 250 m). The estimated capacity of the company is 25,000 MT, which is 18% of market size of 140,000 MT. Even with such a high share in terms of capacity, SCIB has a meager 5% market share in the country. The plant is operating at 50% capacity utilisation levels. Asian Paints own plants operate at 90% plus capacity utilization. The company will bring in its marketing and production expertise for the new acquisition. Further, SCIB primarily operates in the low-end category. However, Asian Paints plans to introduce new products in the future and hopes to increase market penetration. But we do not foresee any significant contribution from this operation till FY04.

    As far as Berger International (BIL) is concerned, there has been a marked improvement in profitability in 1HFY03. As against a loss of S$ 3.9 m in 1HFY02 (Rs 105 m), BIL has posted a profit of S$ 0.4 m (Rs 11 m), which is positive sign. BIL has eleven plants across the globe (Read Asian Paints: Spreading wings for more details). Of the 11 countries, the company has market leadership in 5 countries. One of the big positive for Asian Paints as a result of this BIL acquisition is that the company need not spend significantly on brand promotion, given the strength of Berger brand in all these markets. Another key advantage, which we said in our earlier analysis, is benefits from economies of scale in raw material costs. BIL will add 50,000 MT of capacity to Asian Paints (current capacity utilisation is around 50%).

    Asian Paints has targeted at achieving a 10% turnover growth in the next two years for Asian Paints International (API). API is the holding company for some of its own international operations and the growth projections do not include BIL.

    The stock currently trades at Rs 333 implying a P/E multiple of 15.8x consolidated FY03E earnings. We expect Asian Paints India to remain the key growth driver for the next two years. International operations are a long-term story and we do not see any need to revise our consolidated numbers as of now. For more detailed analysis with projections, view our complete research report on Asian Paints.



    Equitymaster requests your view! Post a comment on "Asian Paints: Analyst meet notes". Click here!


    More Views on News

    Asian Paints: Destocking Ahead of GST Impair Sales Volumes (Quarterly Results Update - Detailed)

    Aug 17, 2017

    Asian Paints registers 20.1% YoY decline in profits during 1QFY18 with low single-digit volume growth in the decorative paints segment.

    Asian Paints: Good Performance Across Segments (Quarterly Results Update - Detailed)

    May 18, 2017

    Asian Paints registers 10.4% YoY growth in profits during 4QFY17 with double-digit volume growth in the decorative segment.

    Asian Paints: Volumes Weighed by Notebandi (Quarterly Results Update - Detailed)

    Feb 17, 2017

    Asian Paints has reported a 2.6% YoY increase in the topline and a 0.6% YoY decline in the bottomline during the quarter.

    Asian Paints: Prolonged Monsoon Impacts Volume (Quarterly Results Update - Detailed)

    Oct 28, 2016

    Asian Paints has reported a 10.2% YoY increase in the topline while the bottomline has grown by 18% YoY

    Asian Paints: A Robust Performance (Quarterly Results Update - Detailed)

    Aug 3, 2016

    Asian Paints has reported a 9.1% YoY increase in the topline while the bottomline has grown by 17.9% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in ASIAN PAINTS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts