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Asian Paints (BOM:500820) |
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Asian Paints
Asian Paints is the leader in the Indian paint industry. It has an overall market share of around 30% and a 54% market share in the decorative paint segment. The company, through a 50:50 joint venture with PPG Industries, US, also has presence in the automotive paints segment. The company has significant global presence through acquisitions, which are being restructured. The management of the company is acclaimed for consistently outperforming industry and its peers in the last decade. Being well focused on its core business of paints it has posted a CAGR of 19% and 22% over the last five years in topline and the bottomline respectively.
For FY09, revenues on a consolidated basis grew by 24% YoY. While the company reported a robust performance in 1HFY09, things took a turn for the worse in 3QFY09, wherein revenues and profits fell sharply. However, demand conditions looked up in 4QFY09, enabling the company to post a strong growth in topline for the full year. The international business grew by 29% led by the Middle East and South Asia operations. The operating margins shrunk from 15% in FY08 to 12% in FY09, thereby leading to a decline in net profits by 3% YoY.
The company’s capex plans are on track with the first phase of Rohtak plant expected to be commissioned by April 2010. Further, the company is also looking to acquire land for its seventh plant in Western Maharashtra. The decorative business is expected to do well and Asian Paints would continue to lay emphasis on driving topline growth going forward. As far as the international business is concerned, focus would be on increasing the market share through initiatives such as new product launches, dealer tinting systems and increasing operating efficiency. However, in the medium term atleast, the management has opined that the slowdown in the economy is likely to take its toll on demand conditions.
| Consolidated results | ||||||
| (Rs m) | 4QFY07 | 4QFY08 | Change | FY07 | FY08 | Change |
|---|---|---|---|---|---|---|
| Net sales | 9,590 | 11,330 | 18.20% | 36,700 | 44,043 | 20.00% |
| Expenditure | 8,420 | 9,773 | 16.10% | 31,919 | 37,461 | 17.40% |
| Operating profit (EBIDTA) | 1,170 | 1,557 | 33.10% | 4,781 | 6,582 | 37.70% |
| Operating profit margin (%) | 12.20% | 13.70% | 13.00% | 14.90% | ||
| Other income | 136 | 134 | (1.80%) | 373 | 620 | 66.30% |
| Interest | 43 | 39 | (8.20%) | 189 | 212 | 11.90% |
| Depreciation & amortisation | 173 | 154 | (10.90%) | 611 | 592 | (3.20%) |
| Profits from associate company | () | () | (4) | () | ||
| Profit before tax | 1,090 | 1,497 | 37.40% | 4,349 | 6,399 | 47.10% |
| Tax | 399 | 477 | 19.60% | 1,467 | 2,034 | 38.70% |
| Extraordinary items | (78) | 2 | (78) | (68) | ||
| Profit after tax | 613 | 1,022 | 66.70% | 2,804 | 4,296 | 53.20% |
| Minority interest | 27 | (54) | () | 21 | 189 | 816.00% |
| Net income | 640 | 968 | 51.30% | 2,784 | 4,108 | 47.60% |
| Net profit margin (%) | 6.70% | 8.50% | 7.60% | 9.30% | ||
| No. of shares (m) | 95.9 | 95.9 | 95.9 | 95.9 | ||
| Diluted earnings per share (Rs)* | 42.8 | |||||
| Price to earnings ratio (x)* | 28.5 | |||||
| (*trailing 12-month earnings) | ||||||
| International business: Slowly recovering… | ||||||
| Sales (Rs m) | CY06 | CY07 | Change | |||
|---|---|---|---|---|---|---|
| Caribbean | 1,520 | 1,500 | (1.30%) | |||
| EBIT margins | 2.60% | 4.70% | ||||
| Middle East | 2,610 | 3,190 | 22.20% | |||
| EBIT margins | 10.30% | 13.20% | ||||
| South Asia | 620 | 830 | 33.90% | |||
| EBIT margins | 3.20% | 7.20% | ||||
| South East Asia | 840 | 890 | 6.00% | |||
| EBIT margins | (16.70%) | (4.50%) | ||||
| South Pacific | 730 | 620 | (15.10%) | |||
| EBIT margins | 6.80% | 11.30% | ||||
| Total sales | 6,320 | 7,030 | 11.20% | |||
| EBIT margins | 3.80% | 8.30% | ||||
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