Asian Paints Fundamental Analysis: Mastering The Market

Asian Paints Fundamental Analysis| Key insights of the stocks | Analysis of key aspects in detail.

Asian Paints- About the company

The company manufactures and markets paints and coating products. It operates through the following business segments: Paints and Home Improvement. The Paints segment manufactures and trades paints and related services. The Home Improvement segment engages in the manufacture and trade of bath fitting products and related services. 

It is the largest paint manufacturer in India also engaged in the business of manufacturing of varnishes, enamels or lacquers, surfacing preparation, organic composite solvents and thinners.

The Indian paints and coatings market is anticipated to reach Rs. 1 lakh crore over the next five years, according to the Indian Paint group (IPA), the country’s leading trade group for the paint and coatings sector. The sector is currently thought to be worth Rs. 62,000 crore. It has routinely demonstrated strong growth over the past few years, outpacing India’s GDP growth rate by 1.5 to 2 times.

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Day-to-day News

Asian Paints Essentials- Fundamental And Financial Analysi

Asian Paints showcases an impressive trailing 12-month operating revenue of Rs. 34,488.59 Cr., with a remarkable annual revenue growth of 18%. Additionally, the company demonstrates healthy profitability ratios, with a ROCE of 36.5% and ROE of 28.3%. The company’s basic EPS is on a growth trajectory, currently standing at 42.76. With a stock P/E ratio of 78.5, Asian Paints presents an attractive investment opportunity.

Moreover, the company maintains a consistent Dividend Yield of 0.77%. Notably, Asian Paints boasts a debt-free status and a robust balance sheet, allowing for stable earnings growth throughout business cycles. Remarkably, the company’s Net Cash Flow From Operating Activities has exhibited consistent growth, reaching an impressive 4,221.65.

Asian Paints Shareholding Pattern

During the last quarter, promoters pledges decreased by a modest 0.77% of their shares, bringing the total unpledged share percentage to 6.49% of their holdings. Despite this, the promoters’ overall ownership remained stable at 52.63% in the September 2023 quarter. On the other hand, Foreign Institutional Investors/Foreign Portfolio Investors (FII/FPI) slightly increased their holdings from 17.48% to 17.65%, although the number of FII/FPI investors decreased from 1183 to 1177. Mutual Funds experienced a slight reduction in holdings from 3.55% to 3.47%, with the number of schemes decreasing from 35 to 34. Institutional Investors, however, raised their stake from 27.54% to 27.71% in the same quarter.

The increase in holdings by Foreign Institutional Investors/Foreign Portfolio Investors (FII/FPI) from 17.48% to 17.65% suggests growing confidence or interest from international institutional investors in the company. It could be driven by factors such as positive financial performance, strategic developments, or overall optimism about the company’s future prospects. The market may interpret this as a good indication as it suggests that outside investors think the firm is a good place to invest. 

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Fundamental statements of Asian paints in Last 10 years

Profit & Loss | Income statements

Over the past 10 years, Asian Paints has seen its sales revenue skyrocket from 7,595 crores in March 2012 to an impressive 30,078 crores in March 2023. That’s almost a fourfold increase, showcasing the company’s remarkable growth. What’s even more impressive is that this growth is consistently accompanied by a rise in the company’s operating profit, which represents the profitability of its core operations before interest and taxes.

Back in March 2012, Asian Paints’ operating profit stood at 1,352 crores, but fast forward to March 2023, and it has surged to an impressive 5,820 crores. This upward trend clearly indicates the company’s ability to generate healthy profits from its core business activities.

Notably, the net profit of Asian Paints has also experienced a significant surge over the years. In March 2012, the company reported a net profit of a modest 958 crores, but by March 2023, it has soared to an impressive 4,100 crores. This substantial increase in net profit further emphasizes the company’s ability to generate strong returns and solidify its position in the market.

EPS and Dividends

Company has a rising Earnings Per Share, or EPS records for the past 10 years indicating a remarkable level of earning consistency. It suggests that Asian Paints has been able to generate increasing profits on a per-share basis, reflecting its ability to effectively manage and grow its business operations. A thing to mention here is that, if in the past 10 years, if the EPS of the company is rising, then it signifies the potential for continued growth and enhanced shareholder value. The company has made a significant leap in its EPS from March 2012 to March 2023, skyrocketing from Rs. 9.99 to an impressive Rs. 42.75.

Asian Paints has witnessed an impressive increase in its dividend payout from 40% in March 2012 to a noteworthy 60% in March 2023.

Overall, Asian Paints’ consistent revenue growth, rising operating profit, and impressive net profit highlight its success in generating increasing profits over the past decade. These numbers speak to the company’s effective business strategies and its ability to seize opportunities for growth in the market.

Cash Flows statements

Cash flow statements, which show the inflows and outflows of cash over a specific time, provide useful insights into a company’s cash flow patterns. The cash created or used in a company’s core operations can be seen in one of these categories, cash flows from operational activities. Surprisingly, the company’s cash flow from operational operations has seen a significant boost, rising from 881 crores in March 2012 to an astonishing 4,222 crores in March 2023—a growth that is over five times more than the industry average.

This substantial increase in cash flow from operational activities is a positive indicator that the company’s core businesses are producing plenty of cash to pay costs and support potential future expansion.

If we analyse both the Income statement and the Cash Flows statements together, then we notice an interesting point that the cash flows from operational activities > Net Income. That is cash flows from operational activities in the March quarter of FY 2023 is 4,222 crores and Net income or Net profit in the same period is 4,100 crores. This consistent growth in cash flow demonstrates the company’s financial stability and underscores its capability to generate healthy profits from its primary business activities.

Overall, the notable surge in cash flow from operating activities implies that the company is on a positive trajectory.

Highlighting some important aspects

Over the past five years, Asian Paints Ltd has shown a steady growth in terms of profit, with a CAGR of 17%. This signifies a consistent increase in their profitability over this period. However, in the trailing twelve months (TTM), the company has experienced even more remarkable profit growth, achieving a growth rate of 30%.

The share price has risen by 26% over the past three years and by 24% in the last one year. In the last year alone, the company’s share price has increased from Rs 2,820.6 to Rs 3,347.2, which translates to a gain of Rs 526.55 or approximately 18.67%.

Company has a good return on equity track record as 3 Years ROE stands at 27.1% and one year ROE stands at 28%.

Despite positive performance indicators, Asian Paints Ltd. faces limitations such as a high PE ratio of 77.81, suggesting a relatively high market price compared to its profits per share. The EV/EBITDA ratio of 50.27 indicates a high valuation relative to operational earnings. Additionally, the stock is trading at 20.6 times its book value implying that investors have high expectations for the company’s future growth prospects.

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A closer look at company’s annual income Statement

In the last year, Asian Paints Ltd. experienced a notable increase in annual revenue, which rose by 18.3% to reach Rs 34,875.1 Crores. Furthermore, the company’s annual net profit showed a significant growth of 35.5% to Rs 4,106.5 Crores during the same period.

Asian Paints Ltd.’s stock price increased little over the past year, by 22.8%, behind its sector by 8.8%. This means that the company’s stock performance was less strong than the sector’s average for comparable firms. Asian Paints Ltd. maintains a favourable debt to equity ratio of 0.1, showing a healthy balance between debt and equity in terms of financial health.

The company’s PE ratio is 78.2, greater than the sector’s PE ratio of 69, which is something to keep in mind. This implies that, in comparison to its business competitors, investors are paying more for the company’s earnings.

ASIANPAINT earnings for the last quarter are 12.87 INR whereas the estimation was 11.75 INR which accounts for 9.53% surprise. Company revenue for the same period amounts to 87.87B INR despite the estimated figure of 87.59B INR. 

Estimated earnings for the next quarter are 12.96 INR, and revenue is expected to reach 95.57B INR.

BOTTOM LINE

In conclusion, a detailed Asian paints fundamental analysis highlights the need for cautious consideration and a thorough evaluation of potential risks. Although Asian Paints Ltd. has demonstrated robust profitability and growth through increased annual revenue and net profit, it is crucial to take into account the high PE ratio, EV/EBITDA ratio, and P/B ratio, which suggest that the stock may be trading at a premium relative to its financial fundamentals.

That being said, it is important to note that Asian Paints Ltd. has a stable growth history and maintains manageable levels of debt. The company has demonstrated effective asset utilization and possesses a strong understanding of how to maximize its resources.

That’s all for today’s post. Hope you get some valuable insight from here.

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Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.