7/31/2019 Asian Paints Ltd Result Update 14 May 2012 Dalmia Securities

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A DALMIA RESEARCH CENTRE REPORT

Relative Performance Analysis

Rating: Neutral

Target: Rs 3848/-

Upside: 5%

CMP: Rs 3623.85/-

APNT IN, ASPN .BO

Result Update| 14May 2012

Asian Paints Ltd

All-round good performanceAsian Paints ltd (APL) Q4FY12 result has surpassed our estimate primarily due to robustvolume growth of ~15-16% in the domestic market. While its revenue has increased by29.48%, its PAT has increase by 39.48% despite higher RM cost and rupee depreciation.Although continuous increase in price for last 2 years may affect APLs volume growth

(~10%), moderation in raw material price inflation may increase its margin (up by~90bps) in FY13. However, we have changed our rating in APL from Accumulate toNeutral due to the sharp run up in the stock price in last few months (aided by inclusionin Nifty), although with a higher target price of Rs 3848/- an upside of 5% from CMP.Domestic Volume growth surprisesAsian Paints Ltd. (APL) on consolidated basis reported a 30.22% YoY growth to Rs 25,387Mn against Rs 19,606 Mn in Total income for Q4FY12, due to continuing good demand( volume growth of ~15-16%) in decorative coatings business in domestic circuit. On theinternational business, the company has witnessed good growth in the South Asian andOman countries. The overseas business has reported 31% growth in the topline at Rs4701.8 Mn. Political events and macroeconomic uncertainty in some countries continuedto affect the international performance. APLs standalone Income grew by 28.88% YoY toRs 20,75.80 Mn against Rs 16,10.63 Mn in Q4FY11.Industrial business, including Auto,

continued to face challenging conditions. We have factored in ~10% volume growth and~18% Sales growth for FY13E in our estimate.Price rise continueAPL has undergone a series of price hike in last year, ~4.3% in May, 2.4% in June, 1.3%in July, 2.2% in December and 1.4% in March, leading to a cumulative price increase of12.28% , mainly to cope higher RM cost and maintain margin. APL has further increasedprice by 2.0% in 29th March and 3.2% in 1st May, which we believe is sufficient to main-tain the margin.

Raw Material price increasesInflationary trend in input prices continued. Material consumption (inc Stock adj.) of thecompany has increased more than proportionately by of 31.99%YoY to Rs 15,213 Mn inQ4FY12 against Rs 11,526 Mn in Q4FY11.The benefit of relative stable crude has been

negated by the rupee depreciation by large extend. Key inputs that go into the making ofpaints include TIO2, vegetable oils and monomers (used to make emulsions) have becomecostlier by 10-12% in the last one year. Availability of Ti02 has eased but high prices re-

mains a concern.For Decorative products, Material price index for Q4 was at 122.99 with2010-11 as base 100.However, we expect RM cost inflation to moderate substantially inFY13, which will lead to 200 bps improvement in gross profit For APL in FY13.

ValuationAt the CMP of Rs 3623.85/-, the stock is trading at 28.5x its consolidated FY13E EPS ofRs 128.3 and 22.9x its consolidated FY14E EPS of Rs 159.7. We believe demand for dec-orative as well as industrial paints will continue to grow, but at slower pace (~18%). APLsbottom line may improve substantially (~26%) in FY13 , mainly due to expansion of mar-gin. However, the sharp run up in the stock in last few months (aided by inclusion in Nifty)

leaves little room for near term appreciation. We have valued APL, rolling over to consoli-dated FY13E EPS of Rs 128.3/- and assigning target P/E of 30x to arrive at a price targetof Rs 3848/-, which is 5% higher than the CMP. We have changed the rating on APL fromAccumulate to Neutral.

PE Band

Please refer to the important disclosures and analyst certification at the end of the document

Face Value (Rs)

Eq. Share Capital (Rs Mn) 9

Share Outstanding (Mn) 9

Market Cap (Mn) 3,47

Book Value / share 28

Daily Avj. Volume 1

52 W High 374

52 W Low 255

Shareholding pattern (%)Promoter 5Institutions 2

Public & Others 2

Subrata Sarkar+91 33 66120722subrata@dalmiasec.com

Year-end: March FY10 FY11 FY12P FY13E FY14E

Net Sales 64,475 77,062 95,983 113,260 133,647EBDITA 12,090 13,130 14,748 18,726 22,764PAT 8,283 8,432 9,887 12,303 15,321EPS 86.35 87.91 103.08 128.26 159.73

Cash EPS 95.27 102.64 116.50 149.33 181.86P/E 23.65 28.29 35.45 28.49 22.88EV/EBITDA 16.31 18.25 23.57 18.66 15.38

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7/31/2019 Asian Paints Ltd Result Update 14 May 2012 Dalmia Securities

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Asian Paints Ltd

14 May 2012

2 of 4Dalmia Research Cente

BackgroundBackgroundBackgroundBackgroundAsian Paints Ltd. is Indias largest, Asias third largest and 10th largest decorative paint company in the world. Asian Paints manufactures a wide range of paints for decorative and industrial (including automotive) use. Asian Paints operates in five regionacross the world viz. South Asia, South East Asia, South Pacific, Middle East and Caribbean Region through the four corporatbrands viz. Asian Paints, Berger International, SCIB Paints and Apco Coatings. Also presents in 17 countries with 23 manufactuing locations, over 2500 SKU's, Integrated SAP, ERP & i2 and SCM solution. Apart from these, the company also manufacture

Unaudited Financial Result (Consolidated) (Rs in Mn)

Particulars Q4FY12Q4FY12Q4FY12Q4FY12 Q4FY11Q4FY11Q4FY11Q4FY11 % chg.% chg.% chg.% chg. FY12FY12FY12FY12 FY11FY11FY11FY11 % chg.% chg.% chg.% chg.

Sales(Net)/Income from operationSales(Net)/Income from operationSales(Net)/Income from operationSales(Net)/Income from operation 25,38725,38725,38725,387 19,60619,60619,60619,606 29.48%29.48%29.48%29.48% 95,98395,98395,98395,983 76,91076,91076,91076,910 24.80%24.80%24.80%24.80%

Other Income 470 250 88.08% 1,413 993 42.36%

Total IncomeTotal IncomeTotal IncomeTotal Income 25,85725,85725,85725,857 19,85619,85619,85619,856 30.22%30.22%30.22%30.22% 97,39797,39797,39797,397 77,90377,90377,90377,903 25.02%25.02%25.02%25.02%

(increase)/decrease in stock in trade and WIP 217.9 -511 -142.62% -1729.5 -1,514 14.21%

Consumption of raw material 14,189 11,429 24.16% 57,205 44,252 29.27%

Purchase of traded goods 805.9 609 32.33% 2294.2 2007.7 14.27%

Material cost 15,213 11,526 31.99% 57,770 44,746 29.11%

Employee cost 1,354 1,150 17.79% 5,260 4,540 15.85%

Other Expenditure 5,066 4,082 24.09% 18,205 14,657 24.21%

Total ExpenditureTotal ExpenditureTotal ExpenditureTotal Expenditure 21,63321,63321,63321,633 16,75816,75816,75816,758 29.09%29.09%29.09%29.09% 81,23581,23581,23581,235 63,94263,94263,94263,942 27.04%27.04%27.04%27.04%

PBDITAPBDITAPBDITAPBDITA 4,224

4,2244,2244,224 3,098

3,0983,0983,098 36.34%

36.34%36.34%36.34% 16,162

16,16216,16216,162 13,961

13,96113,96113,961 15.77%

15.77%15.77%15.77%

PBDITA Margin(%) 16.64% 15.80% 16.84% 18.15%

Depreciation 313.8 291.6 7.61% 1211.3 1131.3 7.07%

PBITA 3,910 2,806 39.33% 14,951 12,830 16.53%

Interest 166 76 118.42% 409.7 232.1 76.52%

PBT 3,744 2,730 37.12% 14,541 12,597 15.43%

Tax 1,097 821.5 33.50% 4,335 3783.9 14.56%

PAT 2,647 1,909 38.68% 10,206 8,814 15.80%

Minority Interest 52.4 48.5 8.04% 318.5 381.1 -16.43%

Net ProfitNet ProfitNet ProfitNet Profit 2,5952,5952,5952,595 1,8601,8601,8601,860 39.48%39.48%39.48%39.48% 9,8879,8879,8879,887 8,4328,4328,4328,432 17.25%17.25%17.25%17.25%

Margins expanded on YoY basisEBIDTA margin has expanded by 84 bps on YoY basis despite higher RM cost and depreciation of rupee due to less than proportionate in employee cost and other expendeture. Other expenditure has increased only by 24.09% YoY to Rs 5,066 Mn. Increasin employee cost by 17.79% , has managed the company to expand margin.Robust PAT GrowthNet profit for the company in Q4FY12 has increased by robust 39.18% on consolidated basis to Rs 2,595 Mn against Rs 1,86

Mn, despite doubling( 118.42% increase) of interest outgo due to lower increase in depreciation by 7.61%.However we expecdepreciation to grow at a faster pace(~28%) in FY13E, due to commissing on Rohtak plant.Net profit on standalone basis haincreased by 42.7% to Rs 2446Mn in Q4FY12from Rs 1714 Mn in Q4FY11.

Joint Venture with PPGPPG Industries Inc. USA has decided to restructure its operations in India, prior to its proposed merger/demerger with the Companies of Asian Paints Group and its Joint Venture Company, Asian PPG Industries Limited. On this note Asian Paints and PPG hadecided to withdraw the Composite Scheme for Merger and Demerger from the court which was filed in Septemb2011.Subsequently, a revised Composite Scheme for Merger and Demerger encompassing all businesses of companies, as enviaged, has been filed with the Honble High Court of Judicature at Bombay in Feb 2012, whose approval is awaited.

Capex planThe construction work at the Khandala plant near Pune in Maharashtra is on schedule. The total investment is expected to baround Rs. 10 Bn. The first phase of 3,00,000 KL per annum is expected to be on stream in Q4-FY13. The plant can be furthe

scaled upto 4,00,000 KL per annum. APL has already commissioned 2nd phase of 50,000 KL capacity at Rohtak plant; enhancefrom 150,000 KL to 200,000 KL

7/31/2019 Asian Paints Ltd Result Update 14 May 2012 Dalmia Securities

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Dalmia Research Cente

Table 2: Profit and Loss (Rs Mn)

YearYearYearYear----end: Marchend: Marchend: Marchend: March FY10FY10FY10FY10 FY11FY11FY11FY11 FY12PFY12PFY12PFY12P FY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14E

Net SalesNet SalesNet SalesNet Sales 64,47564,47564,47564,475 77,06277,06277,06277,062 95,98395,98395,98395,983 113,260113,260113,260113,260 133,647133,647133,647133,647

Growth(%) 18.00% 19.52% 24.55% 18.00% 18.00%

TotalExpenditure 52,385 63,933 81,235 94,535 110,883

EBDITAEBDITAEBDITAEBDITA 12,09012,09012,09012,090 13,13013,13013,13013,130 14,74814,74814,74814,748 18,72618,72618,72618,726 22,76422,76422,76422,764

Growth(%) 80.43% 8.60% 12.33% 26.97% 21.57%

Deprecia-tion 794 1,131 1,211 1,810 2,005

OtherIncome 1,397 826 1,413 1,668 1,968

EBIT 11,296 11,998 13,537 16,916 20,760

Interest 270 222 410 360 288

PBT(Inc. OI) 12,423 12,602 14,541 18,223 22,440

Total Tax 3,682 3,789 4,335 5,548 6,690

PATPATPATPAT 8,2838,2838,2838,283 8,4328,4328,4328,432 9,8879,8879,8879,887 12,30312,30312,30312,303 15,32115,32115,32115,321

PAT Growth( %) 107.85% 1.80% 17.25% 24.44% 24.53%

Table 4: Cash Flow (Rs Mn)

Year-end: March FY10 FY11 FY12P FY13E FY14EPAT 8,283 8,432 9,887 12,303 15,321

Depreciation 794 1,131 1,211 1,810 2,005

Deferred Tax 62 282 77 211 118

Other Income (1,397) (826) (1,413) (1,668) (1,968)

(Inc)/Decin WC 3,527 (1,659) (2,085) (1,202) (1,013)

Cash from OperationCash from OperationCash from OperationCash from Operation 11,26911,26911,26911,269 7,3607,3607,3607,360 7,6777,6777,6777,677 11,45411,45411,45411,454 14,46314,46314,46314,463

Other Income 1,397 826 1,413 1,668 1,968Net (Pur)/Sale of assets/Capex (3,541) (1,235) (6,812) (6,281) (5,281)Net (Pur)/Sale of Invest-ments (5,457) (2,978) 5,672 (3,139) (4,694)

Cash from InvestingCash from InvestingCash from InvestingCash from Investing (7,601)(7,601)(7,601)(7,601) (3,387)(3,387)(3,387)(3,387) 273273273273 (7,752)(7,752)(7,752)(7,752) (8,007)(8,007)(8,007)(8,007)

Dividends & tax thereon (3,023) (3,571) (4,489) (5,586) (6,956)

Net borrowing (794) 55 1,012 (359) (500)Equity Issue 0 0 0 0 0Share premium 0 0 0 0 0

Cash from FinancingCash from FinancingCash from FinancingCash from Financing (3,817)(3,817)(3,817)(3,817) (3,516)(3,516)(3,516)(3,516) (3,478)(3,478)(3,478)(3,478) (5,945)(5,945)(5,945)(5,945) (7,456)(7,456)(7,456)(7,456)

Adjustments/Extra Income (896) - - - -

Cash flowCash flowCash flowCash flow (1,045)(1,045)(1,045)(1,045) 458458458458 4,4724,4724,4724,472 (2,242)(2,242)(2,242)(2,242) (1,000)(1,000)(1,000)(1,000)

Table 3: Balance Sheet ( Rs Mn)

Year end: MarchYear end: MarchYear end: MarchYear end: March FY10FY10FY10FY10 FY11FY11FY11FY11 FY12PFY12PFY12PFY12P FY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14E

Equity 959 959 959 959 959

Reserves &Surplus 16,141 20,915 26,526 33,243 41,608

Total Share-holders fund 17,100 21,874 27,485 34,202 42,567

Total Debt 2,292 2,347 3,359 3,000 2,500

Total LiabilitiesTotal LiabilitiesTotal LiabilitiesTotal Liabilities 20,89920,89920,89920,899 26,61826,61826,61826,618 33,13933,13933,13933,139 39,70839,70839,70839,708 47,69147,69147,69147,691

Gross Block 15,004 19,878 26,623 32,904 38,184

AccumulatedDepreciation 6,276 7,151 8,362 10,172 12,176

Net Block 8,728 12,727 18,261 22,732 26,008

Investments 6,241 9,220 3,547 6,686 11,380

Total CurrentAssets 18,437 23,190 36,239 39,187 44,319

Less: CurrentLiabilities &Provisions 16,947 19,769 25,823 29,813 34,932

Net CurrentAssets 1,490 3,421 10,416 9,375 9,388

Total AssetTotal AssetTotal AssetTotal Asset 20,89920,89920,89920,899 26,17226,17226,17226,172 33,14033,14033,14033,140 39,70839,70839,70839,708 47,69147,69147,69147,691

Cash & Bank 1,058 1,330 6,243 4,000 3,000

Table 5: Key ratiosYearYearYearYear----end: Marchend: Marchend: Marchend: March FY10FY10FY10FY10 FY11FY11FY11FY11 FY12PFY12PFY12PFY12P FY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EPer share valuesPer share valuesPer share valuesPer share valuesEPS (Rs)

86.35 87.91 103.08 128.26 159.73

Cash EPS (Rs) 95.27 102.64 116.50 149.33 181.86DPS (Rs) 0.31 0.36 0.39 0.39 0.39Book Value (Rs) 178.27 228.05 286.54 356.57 443.78Sales per share(Rs) 672.17 803.40 1000.66 1180.78 1393.32ValuationsValuationsValuationsValuationsP/E (x) 23.65 28.29 35.45 28.49 22.88Cash P/E (x) 21.44 24.23 31.37 24.47 20.09P/B (x) 11.46 10.91 12.75 10.25 8.23P/S (x) 3.04 3.10 3.65 3.09 2.62Profitability/ returns/Profitability/ returns/Profitability/ returns/Profitability/ returns/liquidityliquidityliquidityliquidityEBIDTA Margin(%) 18.75% 17.04% 15.37% 16.53% 17.03%

NPM (%) 13.56% 11.44% 10.63% 11.19% 11.78%ROCE (%) 56.56% 49.32% 43.27% 46.25% 47.13%ROE (%) 48.44% 38.55% 35.97% 35.97% 35.99%Debt/Equity 0.13 0.11 0.12 0.09 0.06Interest coverage(Times) 44.79 59.06 36.00 52.02 79.18Current ratio 1.09 1.17 1.40 1.31 1.27Other RatiosOther RatiosOther RatiosOther Ratios

EV 197160 239560 347621 349506 350006EBITDA 12090 13130 14748 18726 22764EV/EBITDA 16.3 18.2 23.6 18.7 15.4EV/Turnover 2.9 2.9 3.3 2.8 2.4

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Asian Paints Ltd

14 May 2012

Financials (Consolidated)

7/31/2019 Asian Paints Ltd Result Update 14 May 2012 Dalmia Securities

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Analyst CertificationThe research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: Allof the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers andtheir securities; and no part of his or her or their compensation was, is, or will be directly or indirectly related to the specificrecommendations or views expressed in this research report.

Disclaimer

This document is not for public distribution and has been furnished to you solely for your information. This material is for thepersonal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to beconstrued as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solici-tation would be illegal. The material is based upon information that we consider reliable, but we do not represent that it isaccurate or complete, and it should not be relied upon as such. Neither Dalmia Securities (P) Ltd, nor any person connectedwith it, accepts any liability arising from the use of this document. The recipient of this material should rely on their investi-

gations and take their own professional advice. Opinions expressed are our current opinions as of the date appearing onthis material only. While we endeavor to update on a reasonable basis the information discussed in this material, there maybe regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautionedthat any forward- looking statements are not predictions and may be subject to change without notice.

We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of thismaterial may; (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies)mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other com-pensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as advisor orlender / borrower to such company(ies) or have other potential conflict of interest with respect to any recommendation andrelated information and opinions. The same persons may have acted upon the information contained here.

Disclosure Appendix

Institutional Sales Desk

Analyst(s) holding in the Stock : Nil

Rating Criteria

BUY: Returns>15%;ACCUMULATE: 5%