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EQUITY RESEARCH REPORT ON ASIAN PAINTS

INDUSTRY – PAINTS AND INTERIOR DECORATION

SONU KUMAR SAH

RANI KUMARI
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Asian Paints LTD

COMPANY PROFILE:- CMP – Rs. 2362.30
.
For over 75 years, Asian Paints have put our hearts to
Target Price – Rs. 1860.25
embellishing and enriching millions of homes across
Asia, the Middle East, Africa and the South Pacific. Downside Potential – 22%
Our forte in all these years has been unwavering
Recommendation - SELL
consumer focus and a relentless zest for innovation.
Since 1942, Asian Paints has remained a reliable partner in making dream homes
a vibrant reality.
Set up in 1942, the Asian Paints group 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. It operates in 15 countries and
has 26 paint manufacturing facilities in the world serving consumers in over 60
countries.
Besides Asian Paints, the group operates around the world through its various brands
viz. Asian Paints Berger, Apco Coatings, SCIB Paints, Taubmans, Causeway Paints and
Kadisco Asian Paints.
It also manufactures metal sanitary ware such as bath, sinks, washbasins and similar
articles. Recently introduced Lightings, Furnishings and Furniture thus adding more
products in the Home décor and Interior Design category.

SHAREHOLDING PATTERN

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OFFERINGS
Products
Paints | Chemicals | Wall coverings | Textures Painting aid | Waterproofing
solutions | Wall stickers | Mechanized tools | Kitchen fittings | Bath fittings and
sanitary ware | Sanitizers and surface disinfectants | Adhesives | Kitchens &
Wardrobes.

Services
Home Painting Services | Interior Design Services | Experience Retail Stores | Colour
Consultancy | Projects | Sanitization services.

REVENUE MIX

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MANAGEMENT OVERVIEW
ASHWINI DANI
(Chairman)
Ashwin Suryakant Dani is an
Indian billionaire businessman, and the non-executive
chairman of Asian Paints Ltd, India's largest paint
company with operations in 16 countries. He was the vice
chairman and managing director from December 1998 to
March 2009. Ashwin is among the top 50 richest Indians.

AMIT SYNGLE
(Managing Director & CEO)

Amit Syngle, is a Mechanical engineer and a

Postgraduate in Management (1990 Batch) from UBS,
Chandigarh. He started his career with the company as a
Management Trainee, and has been working with the
company for last 29 years.

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SWOT ANALYSIS
STRENGTHS
WEAKNESS

High Piotroski Score - Companies with

strong financials
Growth in Net Profit with increasing
Profit Margin (QoQ)
Growth in Quarterly Net Profit with
increasing Profit Margin (YoY)
Increasing Revenue every quarter for
the past 2 quarters
MFs decreased their shareholding last
quarter
Declining Net Cash Flow : Companies
not able to generate net cash
Declining Net Cash Flow : Companies
not able to generate net cash
Bearish Harami (Bearish Reversal)

SWOT

OPPORTUNITIES
Brokers upgraded recommendation or
target price in the past three months
Company is almost debt free. So they
have good opportunities to grow.
Company has been maintaining a
healthy dividend payout of 43.40%
THREATS
Stocks with high PE (PE > 40)
The company has delivered a poor
sales growth of 8.22% over past five
years.

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FINANCIAL SUMMARY

The important things that we look in a company’s Profit & Loss Statement as a
standalone parameter before investing are as follows –
1) Revenues increasing– Before investing in an company we first look at the
topline of the company i.e. revenue it must be increasing and in the case of
Asian Paints from FY16 to FY20 revenue is continuously increasing with a CAGR
of 5% which is a good sign for the company.(No Red Flag)
2) Net profit increasing – As we have seen that the net profit is increasing from
FY16 to FY20 which is a good sign for the company as it shows that the
company is performing very well.(No Red Flag)

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3) Interest expense decrease – Interest expense is increasing from FY16 to FY20

which shows that the company has taken a debt to meet its operations which
is quite risky measure as a standalone factor.(Red Flag)

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Some standalone parameters that we look in the Balance Sheet are as

follows –
1) Share capital should not dilute- In the balance sheet of Asian Paints the share
capital is not diluting i.e. from FY16 to FY20 and expected to remain same in the
forecasted years which is a very good sign for the company and the existing
shareholders. (No Red Flag)

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2) Reserves should be increasing – Reserves of the company are continuously

increasing in the actual period which is again a good sign for the company. (No Red
Flag)
3) Debt should be decreasing – As we have seen in the above analysis that company
has taken a minor debt to manage its operations which is not considered as a good
sign for the company. (Red Flag)

In cash flow statement we look at that the company has surplus cash for its operations
or not and Asian paints has a good amount of surplus cash for its operations (No Red
Flag)
The company also has a good Free Cash Flow Position to pay all of its stakeholders

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PEER COMPARISION

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Asian paints is ranked as 1st position among all its peers on the basis of all the
comparison of ratios and based on that we can do our asset allocation in Asian paints
considering this standalone factor.

P/E RATIO AS AN STANDALONE FACTOR

P/E ratio is a standalone measure to look at as it tells us that whether the company
is currently undervalued or overvalued. If PE Ratio is less than industry average the
stock is said to be undervalued i.e. a good buying opportunity as it is considered to
be cheaper than its peers and if it is above the industry average then it is said to be
overvalued i.e. a selling opportunity as it is considered to be very costly.
Asian paints has a PE of 83.25 and the industry average is 100 it is completely
undervalued and hence a good buying opportunity considering the PE factor.

VALUATION

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Valuation summary - Asian Paints group 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. It operates in 15
countries and has 26 paint manufacturing facilities in the world serving consumers in
over 60 countries. Asian paints is currently trading at an EV/EBITDA multiple 37.85x and
due to Covid-19 there is decrease in some figures in year 2020. So after analyzing all
the parameters we come at a target price of 1860.25 i.e. Asian paints is currently
overvalued and we give it a sell rating.

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RANI KUMARI
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TECHNICAL ANALYSIS
For a fast and easy way to analyze a stock without any model, we go with the some
technical analysis indicators and methods. Here, the summary of ASIAN PAINTS LTD.
Is based on the most popular technical indicators-
 Moving Average
 Oscillators
 Pivots

1. MOVING AVERAGE
The moving average (MA) is a simple technical analysis tool that smooth out price
data by creating a constantly updated average price. The average is taken over a
specific period of time, like 10 days, 20 minutes, 30 weeks or any time period the
trader chooses. When price action tends to stay above the moving average, it signals
that price is in a general UPTREND. If price action tends to stay below the moving
average, then it indicates that it is in a DOWNTREND.
ASIAN PAINTS currently trading below the 5-DMA, 20-DMA, 50-DMA and 100-DMA
which shows a bearish trend or downtrend in upcoming months.

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2. OSCILLATORS

In technical analysis in finance, a technical indicator is a mathematical

calculation based on historical price, volume, or open interest information that
aims to forecast financial market direction.
According to technical indicators also ASIAN PAINTS shows Bearish indication.

3. PIVOT POINTS

In financial markets, a pivot point is a price level that is used by traders as a

possible indicator of market movement. A pivot point is calculated as an
average of significant prices from the performance of a market in the prior
trading period. A pivot point is a technical analysis indicator, or calculations,
used to determine the overall trend of the market over different time frames.
The pivot point itself is simply the average of the intraday high and low, and
the closing price from the previous trading day.
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Here, R1 R2 R3 is the different Resistance Level and S1 S2 S3 is the different Support

level.
NOTE: - Support and Resistance level for the day, calculated based on price range
of the previous trading day.

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CHART ANALYSIS

On daily chart, ASIAN PAINTS is showing the downside movement in upcoming weeks
or months. According to daily chart, the current Support line will become the new
Resistance line and the current resistance line will become new Support line.

NOTE: - All the data taken for the purpose of Technical analysis is as on date of
March 8, 2021 and the source of data is MONEY CONTROL and INVESTING.COM.

CONCLUSION
So according to both Fundamental and Technical analysis, ASIAN PAINTS will have
downside potential.
DISCLAIMER: - This is solely for educational purpose only. We do not recommend
for any kind of investment and trade.

SONU KUMAR SAH

RANI KUMARI