Asian Paints - Result Analysis Q1 FY21

Asian Paints - Result Analysis Q1 FY21

CMP: 1,7151 (As on 27-07-2020 @ 12:21)

Total revenue from operations 2,922 Cr 

5,105 Cr (-42.71%) YoY | 4,636 Cr (-36.91%) QoQ 

Year ending revenue: 20,211 Cr Vs. 19,240 Cr (5.04%)

Net Profit of 219.6 Cr 

672.1 Cr (-67.22%) YoY 480.2 Cr (-54.31%) QoQ 

Year ending Net profit: 2,774 Cr Vs. 2,156 Cr (28.66%)

EPS (in Rs.) 2.28

6.83 YoY |4.82 QoQ 

Year ending EPS: 28.20 Vs. 22.48

View: Result is in line with the expectation. YoY revenue declined and profit also corrected due to Covid-19 outbreak lower sales and lower realizations. 

Business Updates & Highlights:

Q1FY21 EBITDA was around INR 484.2 Cr Vs. 1,158 Cr in Q1FY20 therefore declined by 58.2% in YoY. EBITDA margin is around 16.6% Vs. 22.6% in YoY. 

Financial

ROE and ROCE is around INR 28% and 34% respectively and book value per share is around INR 105 and share is currently trading at 16.4x of its book value. Company is currently trading at annualized PE of 80 which is high as per Industry benchmark. Promoter holding is around 52.8% in the company which is strong and stable. FIIs, mutual fund and insurance cos hold around 18.2%, 3.9% and 4.4% in the company. 

Position: Share support price is INR 1,650/1565. Long term investor should continue with the company and any correction will give good opportunity to add on SIP basis for long term. 

Share View: Share price high 1,915 (52 week) and now 1,710. Asian Paints is India’s leading paint company and ranked among the top ten Decorative coatings companies in the world. Asian Paints along with its subsidiaries have operations in 15 countries across the world with 26 paint manufacturing facilities, servicing consumers in over 60 countries through Asian Paints, Apco Coatings, Asian Paints Berger, Causeway Paints, SCIB Paints, Taubmans and Kadisco Asian Paints. Asian Paints is also present in the Home Improvement and Décor space in India through Sleek (Kitchens, Wardrobes) and Ess Ess (Bath Fittings & Sanitaryware)

Opportunities: While the quarter ended in a negative territory, the business registered a healthy double digit volume growth in the month of June’20 to end the quarter on a promising note. The other business segments in India including the two industrial coatings business and both the segments in the Home Improvement category also witnessed improving trends in June’20, albeit at a lower pace. The International business portfolio did well supported by favourable operating conditions in markets in Middle East and Africa though key markets of Nepal and Bangladesh in Asia were impacted by the pandemic lockdowns. Profitability across businesses was well supported by the softer raw material prices and the various cost control measures being actively pursued by the Management. Further strong business profile and brand Asian Paint can recover smartly well in Q2 onwards. Strong ROE which is around 29%, sales growth is around 12% and profit growth is around 13% in past 10 years. And share price also given 21.5% CAGR. 

Risk: Company is currently trading at expensive valuation as per the current peers. Covid -19 outbreak pressure cant be discounted and consumption sector growth is also slow for this FY21. Main seasonal Diwali business can be further impacted on account of long outbreak of Covid-19.

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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