Asian Paints company analysis

Industry Overview : Colours are inseparable part of human life. From start of the day to end of the life, there is always some colour code for our clothing. Art and other things are also part of Our life. And when it comes to part of our cars, home, industrial use, Paints industry play key role.

Interestingly in India the use of Paints is much less, per capita consumption of Paints in India is around 4kg. That is the reason why it will be easy for paint industry to grow with 13% per annum in near future. As the Industrialisation amd domestic consumption is expected to grow, with smart city and other Industrialisation expected to grow, consumption of Paints is also expected to grow. In both broad Categories of Paints,  Decorative and industrial Paints, the growth is expected in both. But as in India the supply exceeds demand for Both, the important driver is increase in consumption. As 70% of paint market is dominated by decorative paint like interior and exterior wall and housing paint, it gives big leverage for India.

The important factor for paint industry is Raw material, with 300 different Raw material, out of which big part is Crude Oil, lower Crude Oil is Good for industry.

Company overview : Asian Paints, 75 years old well known company in India. The promoter group (four friends) realised the opportunity of Paints industry in early Days and build the company from grass roots. From 1967 it is India’s largest paint company. Most important thing is there is not one promoter but many among three families.The company is also a case study for continued Revenue growth, earnings growth, discipline of Capital investment due to which it is keeping very high Return on Capital Invested. It is also that company which first to use mainframe computer for forecast of demand. It also keeping the same promoter and where Foreign SHAREHOLDING is not big so management is independent to keep eye on long term goals. Unlike their competitors, the company started With decorative paint as it has the sustainable strength. With innovative ideas they make new type of product like washable distemper.

This is also only one indian paint company where brand recall is big for nearly all of Their brand. Where other companies need to make it heavy advertising. The company also taking right decisions on many occasions and now operating in offshore also with Joint venture and manufacturing units.

If there is any Moat in the company it is with supply chain efficiency and working capital management due to use of information technology.

SHAREHOLDING

Financials and Ratios :

 2010-112011-122012-132013-142014-152015-16
Revenue7722.309598.3310938.6113413.8414182.8 115534.14
Net Profit843.24988.731113.881218.811395.151726.21
Net Profit Margin12.2312.0311.7011.2211.3912.63
ROE39.2435.9131.9132.4631.3732.18
ROCE35.5535.6231.9129.9929.3930.14
ROA20.1019.2418.5817.4918.2519.09
Debt to Equity0.030.070.020.010.010.01
EPS80.8199.92109.4712.1913.8416.65
Dividend per Share3240465.306.107.50
Dividend Payout39.5938.8139.6141.7141.9441.67

Future prospects : Asian Paints is that company which know it’s customer and their needs. Past performance is proof that if you are invested in Asian Paints than hardly there is anything you need to worry. It is No brainer investment similar like HDFCBANK. The company is operating successfully all-over history and will keep operating same.
As India is becoming one of the largest Automotive manufacturer and still there is only 30% of paint industry is industrial, gives big plus point. Asian Paints is well known in India and the network of Supplier and development of new product is helpful for company. Brand name and Suppliers network makes it harder for other to enter into the compitition.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter