Asian Paints discussing with two states for new paint plants, Buy say Firstcall #BrokerAdvice http://goo.gl/lvR5yp

1. CMP 843.15
Target Price 930.00
ISIN: INE021A01026
JULY 23rd
2015
ASIAN PAINTS LIMITED
Result Update (CONSOLIDATED BASIS): Q1 FY16
BUY
Index Details
Stock Data
Sector Paints
BSE Code 500820
Face Value 1.00
52wk. High / Low (Rs.) 922.80/593.00
Volume (2wk. Avg.) 185000
Market Cap (Rs. in mn.) 808749.48
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 141828.10 157429.19 173172.11
EBITDA 24051.20 27927.48 30414.84
Net Profit 13951.50 16546.72 18285.97
EPS 14.54 17.25 19.06
P/E 57.97 48.88 44.23
Shareholding Pattern (%)
1 Year Comparative Graph
ASIAN PAINTS LTD S&P BSE SENSEX
SYNOPSIS
Asian Paints is India’s leading paint company and
ranked among the top ten Decorative coatings
companies in the world with a consolidated
turnover of Rs. 141.84 billion.
During Q1 FY16, Asian Paints Income from
operations has risen by 7.77% to Rs. 36234.70 mn
from Rs. 33622.40 mn in Q1 FY15.
During the quarter, PBDIT for the group increased
by 25.37% to Rs. 7569.90 mn from Rs. 6038.20 mn
in the previous corresponding period.
For Q1 FY16, PBT increased by 34.05% to Rs.
6787.60 mn from Rs. 5063.30 mn in Q1 FY15.
During Q1 FY16, Net Profit after Minority Interest
was increased by 34.39% to Rs. 4551.80 mn as
compared to Rs. 3387.00 mn in Q1 FY15.
The capex plan for FY16 at the standalone company
level is around Rs. 7000 mn. The expansion work at
company’s Rohtak (Haryana) plant from 200,000
KL/annum to 400,000 KL/annum is progressing as
per schedule.
For the quarter ended June 30, 2015, standalone
Income from Operations has increased by 7.2% to
Rs. 29381.6 mn from Rs. 27407.6 mn.
Standalone Net Profit for the quarter increased by
38.5% to Rs. 4278.1 mn from Rs. 3088.4 mn.
The company had signed an MOU with the Govt. of
Andhra Pradesh for setting up 400,000 KL paint
manufacturing facility at Vishakhapatnam district.
The company is also in discussions with the Govt. of
Karnataka to set up another paint manufacturing
facility at Mysuru district.
Net Sales and PAT of the company are expected to
grow at a CAGR of 12% and 13% over 2014 to
2017E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Asian Paints Ltd 843.15 808749.48 14.54 57.57 17.05 610.00
Kansai Nerolac Paints Ltd 258.70 139418.50 5.04 51.33 8.73 140.00
Berger Paints India Ltd 216.05 149784.90 3.82 56.56 11.89 125.00
Akzo Nobel India Ltd 1310.30 61139.00 44.14 29.69 5.92 200.00

2. QUARTERLY HIGHLIGHTS (CONSOLIDATED)
Results updates- Q1 FY16,
Asian Paints is India’s leading paint company and
ranked among the top ten Decorative coatings
companies in the world with a consolidated
turnover of Rs. 141.84 billion, reported its financial
results for the quarter ended 30th June, 2015.
Months Jun-15 Jun-14 % Change
Net Sales 36234.70 33622.40 7.77
Net Profit 4551.80 3387.00 34.39
EPS 4.75 3.53 34.39
PBDIT 7569.90 6038.20 25.37
The consolidated net profit jumps to Rs. 4551.80 million against Rs. 3387.00 million in the corresponding
quarter ending of previous year, an increase of 34.39%. Revenue for the quarter rose by 7.77% to Rs. 36234.70
million from Rs. 33622.40 million, when compared with the prior year period. Reported earnings per share of the
company stood at Rs. 4.75 a share during the quarter, registering 34.39% increase over previous year period.
Profit before interest, depreciation and tax is Rs. 7569.90 million as against Rs. 6038.20 million in the
corresponding period of the previous year.
Break up of Expenditure
Break up of
Expenditure
Rs. in millions
Q1 FY16 Q1 FY15
%
CHNG
Cost of Material
Consumed
17560.80 17687.80 -1%
Purchase of Stock in
Trade
1613.40 1582.90 2%
Employee Benefit
Expenses
2476.20 2252.80 10%
Depreciation &
Amortization Expense
693.20 645.50 7%
Other Expenditure 7462.40 6546.10 14%

3. CAPEX
The capex plan for FY 2016 at the standalone company level is around Rs. 700 crores. The expansion work at
company’s Rohtak (Haryana) plant from 200,000 KL/annum to 400,000 KL/annum is progressing as per
schedule.
New Paint Manufacturing Facility in South India
The company had earlier announced that it has signed an MOU with the Govt. of Andhra Pradesh for setting up
400,000 KL paint manufacturing facility at Vishakhapatnam district. The company is also in discussions with the
Govt. of Karnataka to set up another paint manufacturing facility at Mysuru district. Both these proposals for
setting up manufacturing facilities in the states of Andhra Pradesh and Karnataka are towards fulfilling the long
term capacity requirements and are subject to the demand conditions.
Standalone Results (Q1 FY16):
• For the quarter ended June 30, 2015, Income from Operations has increased by 7.2% to Rs. 29381.6 mn from
Rs. 27407.6 mn. PBDIT (before exceptional item) for the quarter increased by 25.1% to Rs. 6059 mn from Rs.
4845 mn. Net Profit for the quarter increased by 38.5% to Rs. 4278.1 mn from Rs. 3088.4 mn.
Latest Updates
• Asian Paints Ltd has announced that the Company’s plan to consolidate its investments in its overseas
subsidiaries, Asian Paints (International) Limited, Mauritius, a wholly owned subsidiary of the Company has
transferred its entire holding of 89.78% held by it in its subsidiary - Asian Paints Bangladesh Limited,
Bangladesh to its wholly owned subsidiary, Berger International Limited, Singapore.
• During the quarter, the consolidated results include financials of Kadisco Paint and Adhesive Industry Share
Company, (Ethiopia) in which the Company’s wholly owned subsidiary Berger International Limited,
Singapore acquired 51% stake on 9th February, 2015.
COMPANY PROFILE
Asian Paints is India’s leading paint company and ranked among the top ten Decorative coatings companies in
the world with a consolidated turnover of Rs. 14,183.5 crores (Rs. 141.84 billion). Asian Paints along with its
subsidiaries have operations in 19 countries across the world with 26 paint manufacturing facilities, servicing
consumers in over 65 countries through Berger International, SCIB Paints – Egypt, Asian Paints, Apco Coatings,
Taubmans and Kadisco. Asian Paints has also marked its foray into the Home Improvement and Décor space in
India with the acquisition of Sleek group – a kitchen solutions provider and Ess Ess Bathroom Products - a
prominent player in the bath and wash segment in India.

4. FINANCIAL HIGHLIGHT (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31st, 2014 -2017E
ASIAN PAINTS LTD. FY14A FY15A FY16E FY17E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 959.20 959.20 959.20 959.20
Reserves and Surplus 39433.00 46464.40 54363.35 63061.48
1. Sub Total - Net worth 40392.20 47423.60 55322.55 64020.68
2. Minority Interest 2460.20 2636.70 2742.17 2851.85
Non Current Liabilities
Long term borrowings 414.00 782.80 939.36 1070.87
Deferred Tax Liabilities 1900.10 1801.40 1873.46 1929.66
Other Long term Liabilities 91.30 111.30 125.77 139.60
Long Term Provisions 1085.30 1196.70 1280.47 1357.30
3. Sub Total - Non Current Liabilities 3490.70 3892.20 4219.05 4497.43
Current Liabilities
Short Term Borrowings 1986.30 3316.20 3780.47 4158.51
Trade Payables 17457.20 15487.50 14248.50 13251.11
Other Current Liabilities 9014.50 9974.50 10872.21 11524.54
Short Term Provisions 5593.20 6394.10 6905.63 7389.02
4. Sub Total - Current Liabilities 34051.20 35172.30 35806.80 36323.18
Total Liabilities (1+2+3+4) 80394.30 89124.80 98090.57 107693.15
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
Tangible assets 23307.40 22901.60 23851.19 25094.58
Intangible assets 894.50 1240.70 1426.81 1612.29
Capital Work in Progress 716.00 1960.00 2312.80 2659.72
a) Sub Total - Fixed Assets 24917.90 26102.30 27590.80 29366.59
b) Goodwill on consolidation 1413.90 2458.10 2851.40 3193.56
c) Deferred Tax Asset 21.90 2.00 2.12 2.23
d) Non-current investments 1921.30 3858.80 4707.74 5413.90
e) Long Term loans and advances 1302.50 2784.60 3341.52 3876.16
f) Other non-current assets 252.20 367.10 447.86 524.00
1. Sub Total - Non Current Assets 29829.70 35572.90 38941.43 42376.44
Current Assets
Current Investment 5290.60 12019.10 13821.97 15757.04
Inventories 20698.60 22585.20 24346.85 26294.59
Trade receivables 11102.80 11798.50 12388.43 13131.73
Cash and Bank Balances 9316.60 2043.60 2656.68 3347.42
Short-terms loans & advances 2464.60 2619.50 2802.87 3027.09
Other current assets 1691.40 2486.00 3132.36 3758.83
2. Sub Total - Current Assets 50564.60 53551.90 59149.14 65316.71
Total Assets (1+2) 80394.30 89124.80 98090.57 107693.15

5. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 127148.10 141828.10 157429.19 173172.11
Other Income 1342.20 1697.10 1951.67 2049.25
Total Income 128490.30 143525.20 159380.86 175221.36
Expenditure -107169.20 -119474.00 -131453.37 -144806.52
Operating Profit 21321.10 24051.20 27927.48 30414.84
Interest -422.20 -347.60 -396.26 -439.85
Gross profit 20898.90 23703.60 27531.22 29974.99
Depreciation -2456.60 -2659.20 -2845.34 -3016.06
Exceptional Items -99.60 -275.70 0.00 0.00
Profit Before Tax 18342.70 20768.70 24685.87 26958.92
Tax -5715.10 -6495.40 -7788.39 -8357.27
Profit After Tax 12627.60 14273.30 16897.48 18601.66
Minority Interest -439.50 -321.80 -350.76 -315.69
Net Profit 12188.10 13951.50 16546.72 18285.97
Equity capital 959.20 959.20 959.20 959.20
Reserves 39433.00 46464.40 54363.35 63061.48
Face value 1.00 1.00 1.00 1.00
EPS 12.71 14.54 17.25 19.06
Quarterly Profit & Loss Statement for the period of 31st Dec, 2014 to 30th Sep, 2015E
Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E
Description 3m 3m 3m 3m
Net sales 36525.90 35350.30 36234.70 38771.13
Other income 320.50 423.80 734.50 646.36
Total Income 36846.40 35774.10 36969.20 39417.49
Expenditure -30691.00 -29758.40 -29399.30 -31986.18
Operating profit 6155.40 6015.70 7569.90 7431.31
Interest -97.80 -101.90 -89.10 -94.45
Gross profit 6057.60 5913.80 7480.80 7336.86
Depreciation -673.20 -671.70 -693.20 -714.00
Exceptional Items 0.00 -24.10 0.00 0.00
Profit Before Tax 5384.40 5218.00 6787.60 6622.87
Tax -1667.30 -1698.00 -2113.40 -2089.51
Profit After Tax 3717.10 3520.00 4674.20 4533.35
Minority Interest -35.30 -110.30 -122.40 -112.61
Net Profit 3681.80 3409.70 4551.80 4420.74
Equity capital 959.20 959.20 959.20 959.20
Face value 1.00 1.00 1.00 1.00
EPS 3.84 3.55 4.75 4.61

6. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 12.71 14.54 17.25 19.06
EBITDA Margin (%) 16.77% 16.96% 17.74% 17.56%
PBT Margin (%) 14.43% 14.64% 15.68% 15.57%
PAT Margin (%) 9.93% 10.06% 10.73% 10.74%
P/E Ratio (x) 66.36 57.97 48.88 44.23
ROE (%) 31.26% 30.10% 30.54% 29.06%
ROCE (%) 55.57% 51.84% 51.25% 48.28%
Debt Equity Ratio 0.06 0.09 0.09 0.08
EV/EBITDA (x) 37.36 33.21 28.54 26.13
Book Value (Rs.) 42.11 49.44 57.68 66.74
P/BV 20.02 17.05 14.62 12.63
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs.843.15, the stock P/E ratio is at 48.88 x FY16E and 44.23 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.17.25 and
Rs.19.06 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 13% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 28.54 x for FY16E and 26.13 x for FY17E.
Price to Book Value of the stock is expected to be at 14.62 x and 12.63 x for FY16E and FY17E respectively.
No significant improvement in demand conditions witnessed in the decorative coatings business in India in the
Quarter. Lower raw material prices aided gross margins of the business. The growth in the Industrial coatings JV
(AP-PPG) was led by a good demand in Industrial Liquid Paints and Powder coatings segment. The Automotive
coatings JV (PPG-AP) witnessed subdued demand conditions both in the General Industrial as well as Auto OEM
segment. The Auto Refinish segment registered decent growth. The international business reported satisfactory
performance aided by contribution from the units in Middle East and in Ethiopia. The company continues to
remain very cautious on the domestic demand outlook. Raw material prices are expected to remain low in the
near term and this would aid margins. Hence, we recommend ‘BUY’ in this particular scrip with a target price of
Rs.930.00 for Medium to Long term investment.
INDUSTRY OVERVIEW
DECORATIVE INDIA BUSINESS
Environment
The overall weak demand environment in the economy was also reflected in the decorative paints demand in the
domestic market. Demand conditions have been challenging across most of the markets – more severely so in
states of Punjab, Delhi, Tamil Nadu and Kerala. A short Diwali festival season, unseasonal rains and prolonged
winter in Northern India have also added to the woes of the paint industry. The Institutional sales business also
faced a slowdown of demand. Notwithstanding the trying circumstances, Asian Paints did well to manage and
grow its business in most parts of the country. And while this growth was lower than expected, profitability
improved on account of reduction in key raw material prices, specifically in the second half of the year, on the
back of significant drop in crude prices.

8. Emulsions
At a product category level, the growth in interior emulsions continues to be led by ‘Tractor Emulsion’ with
advertising and field initiatives focused on the proposition of ‘smart choice’. The growth in top end ‘Royale
Emulsion’ has been on a lower side. However, the top end variant ‘Royale Aspira’, which had a nationwide launch
in the previous year, has done well across markets.
In the exterior emulsion category, the top end brand ‘Ultima’ continues to grow well. ‘Ultima Protek’, that offers
best in class benefits, has grown rapidly across retail and projects segments. The economy segment in exterior
emulsions has witnessed slowdown in growth. With sustained efforts in educating the customers and painters on
the use of correct painting system, the growth of exterior undercoats has been good.
Wood Finishes
In the wood finishes category, the high end finishes like Polyester and Polyurethane (PU) launched in
collaboration with Renner Italia of Italy have performed well across markets. ‘Aquadur’, water- based PU, has
been well accepted in the market. Asian Paints has extended the concept of ‘inspiration décor’ even in the wood
finishes category by launching full range of clear and opaque colours across different products and exclusive
special effects in wood and glass coatings.
Outlook
Crude prices have declined significantly in past six months and are hovering at around a six –year low. Lower
input costs and volume growth may lead to a 300 basis points (bps) margin expansion for Asian Paints. Even
other paint companies may see earnings and margin expansion.
Some paint companies might pass on the benefit of softening oil prices to consumers to propel volume growth by
keeping realizations low, while others might resort to brand investments or capacity expansion. Lower prices
and an improvement in demand from the automotive and industrial segment as economic recovery gathers
steam should help paint companies clock volume growth in the range of 9-13 percent for FY15-16.
Indian paint industry is likely to see a 20 percent compounded annual growth rate until 2016 on the back of
increasing demand from retail consumers, on rapid urbanisation, and development of rural markets. A rise in
disposable income of the average middle class coupled with increasing investment on education, urbanisation,
development of the rural market and various launches of many innovative products will also be major drivers.

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in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.

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