Institutional Equity Research

Institutional Equity Research
IOTA
Asian Paints Ltd Research

LTD
Booming Volume and demand Reinforce decorative margins

CMP: INR 3202.15 TP: INR 3872 ( +20.9%) BUY
Topline is driven by a favourable base and pent-up demand Asian 17 OCTOBER 2022
Paints (APL) is India's leading decorative paint company. The paints
division accounts for 98% of the company's revenue, while the home
Shareholding pattern
improvement division accounts for 2%. (Fittings for the kitchen and
bathroom). The business has 1,45,000 dealers in India, which is 2.3 Particulars Mar- Dec- Sep-21
22 21
times more than the No.2 player Promoters 52.6 52.6 52.8
Margins Likely to Increase Amid Volatility Input Prices Gross FIIs 19.5 20.5 21
margin decreased sequentially by 100bps as Asian Paints saw further
DIIs 7.6 7.2 6.8
inflation of 6% QoQ, which was largely mitigated by a 2% price
increase in Q1. Soon, Asian Paints aims to keep its gross margin Others 20.3 19.7 19.4
within a range of 38 to 40 percent as it expects input cost inflation to Total 100 100 100
sustain in the near term. Asian Paints expects savings from sourcing
efficiency/operating leverage to absorb some inflation shock.
Paint demands continues to remain broad based and balanced The Revenue (INR Cr)
Indian paint industry has seen a gradual shift in people's preferences
3,171.30 916.87 930.00
from traditional whitewash to high quality paints like emulsions and 5,981.76
enamel paints, which is providing the basic stability for the industry's
29,10
growth. 1.28
7,804.05
Capacity and network expansion to meet growing demand- With
the growing demand across the paint industry, the company has been Asian Paints Berger Paints
Kansai Nerolac Akzo Nobel
increasing its capacity level across its manufacturing units. Currently,
Indigo Paints Nippon Paint
the company has almost 1750000 in total throughout its manufacturing
units. The company has planned major investments to expand various
plants in order to meet the future demand.
R&D arm to guide Revenues The entire 'Breakthrough Innovation'

programme has created a massive ripple and transformation not only
at the Research & Technology function, but also throughout the
organisation. Last year, the breakthrough innovation project 'Misaal'
created some ground-breaking products and chemistries in its fifth
avataar.
Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

INVESTORS ARE ADVISED TO REFER TO IMPORTANT DISCLOSURES MADE IN THE REPORTS
IOTA EQUITY RESEARCH IS AVAILABLE ON www.iotaresearch.com/ Bloomberg
Economic Outlook
Global Outlook
The invasion of Ukraine by Russia has impacted the global economy. Indicators in many economies
currently indicate a longer period of moderate growth after the global economy's growth stagnated in the
second quarter of 2022. Global growth is anticipated to fall from 3% in 2022 to 2.25 % in 2023,
significantly slower than was anticipated before the war. Almost everywhere, there are inflationary
pressures that extend beyond food and energy, and firms are passing along rising labour, transportation,
and energy expenses. Next year, inflation pressures should be reduced by tighter monetary policy and
fewer supply constraints, but increasing energy and labour costs are anticipated to impede the rate of fall.
Indian Outlook
The Indian economy is slowly loosing pace as monetary
policy normalises, inflationary expectations remain high
due to rising food and energy costs, and the global
economic situation worsens after the G20 recorded the
highest GDP rebound in 2021. It is estimated that real
GDP growth will be 6.2% in FY2024 and 6.9% in
FY2023.The rise in the import price of energy will cause
the current account deficit to grow while inflation will
slowly drop. The Indian economy is on the verge of
dominating the global economy. India now accounts for 7% of the global economy and ranks third in terms
of Purchasing Power Parity (PPP), trailing only China (17% PPP share) and the United States (15%).
Indian Paint Industry

In 2020, the Indian paints market was valued at USD 6,603.08 million, and it is expected to reach USD
10,160.52 million by 2026, at a CAGR of 7.91% for the period 2021 to 2026. The main driver of the Indian
paint market is the widening construction industry. Asian Paints, Berger Paints India Limited, Kansai

Nerolac Paints Limited, AkzoNobel NV, and Nippon Paint Holding Co. Ltd. are among the industry's
major players, which accounts for over 65% of the paint and coatings market and 75% in the decorative
paints market.
Decorative paints account for more than 75% of the paint market and are primarily used in real estate for
exterior and interior wall paints, enamels, wood finishes, and so on. Furthermore, rapid urbanisation in
Indian cities, increased government project construction, and rising infrastructural development make the
decorative paints market in India more competitive for marketers.
Drivers of the Industry

Rising Demand of the Construction Industry
The construction industry is the second largest industry in India with a contribution of about 9% GDP. Per
capita paint consumption is driven by rising living standards, increased disposable income, and growing
interior decoration trends. In the period 2000-2020, the construction industry in India received the second-
highest FDI. The government’s various huge projects like the Housing for All initiative, Smart cities
mission boost the demands of construction industry.
Protective Benefits offered by the Decorative Paints
Infrastructure aesthetic feasibility is on the upsurge, alongside functionality such as insulation, wettability,
UV radiation resistance, moisture control, or adhesion. The use of decorative paints in various stages of
construction, such as roof coatings, or deck finishes for aesthetic appeal, is expected to present the market
with ample opportunities and market share.

Topline is driven by a favourable base and pent-up demand
Asian Paints (APL) is India's leading decorative paint company. The paints division accounts for 98% of
the company's revenue, while the home improvement division accounts for 2%. (Fittings for the kitchen
and bathroom). The business has 1,45,000 dealers in India, which is 2.3 times more than the No.2 player.
Despite being in a capital-intensive industry, the company has maintained a strong balance sheet and a
ROE of 20%. Revenue and bottom-line growth expectations were exceeded, but EBITDA margins were
lower than expected. Solid year-on-year sales growth aided PAT growth. The company raised prices by 3%
and has explained that it will continue to raise prices in order to maintain EBITDA margins in the 18-20%
range. The company's balance sheet is strong, with steady working capital management and a low debt-to-
equity ratio.
As the long-term story remains intact, the company will continue to focus on increasing market share, new
product offerings, and expanding distribution reach. Product mix enhanced sales of economy and luxury
emulsions, as well as premium water proofing and wood finishing touches. 40 patents and 300 unique
products, among the best in the industry. Tier 1/2 cities experienced strong double-digit growth,
particularly in the luxury and premium segments, and continued to grow faster than T3/T4 cities. During
the quarter, the company released ten new products. The premium valuation of APL is justified by its solid
reputation, market leadership, and strong balance sheet. During the last five years, APL has been a steady
compounder, with a 31% CAGR in share price appreciation.
 Leading player in the domestic

decorative paints industry
 Distribution reach expansion
remains a key pillar for growth
 Leading player in the domestic
decorative paints industry
 Over the fiscal years 2010-19,
Right Quality – APL capacity increased by 13 lakh KL.
 Innovation continues to be a key
 Large international presence; leadership
growth strategy
position in most markets
 Higher capital expenditure had no
 APL's revenue will grow at a 10% CAGR
effect on the balance sheet, and
 Lower input prices will drive margins in
dividend pay-out remained strong.
the short term

Margins Likely to Increase Amid Volatility Input Prices
Gross margin decreased sequentially by 100bps as Asian Paints saw further inflation of 6% QoQ, which
was largely mitigated by a 2% price increase in Q1. Soon, Asian Paints aims to keep its gross margin
within a range of 38 to 40 percent as it expects input cost inflation to sustain in the near term. Asian Paints
expects savings from sourcing efficiency/operating leverage to absorb some inflation shock.
During 2021, The industry leader in decorative paints, Asian Paints Ltd., has been severely impacted by
rising commodity prices really challenging Its gross margins. It decreased by 970 basis points (bps) to 34.7
percent in the September quarter as compared to the same period last year. One hundredth of a percentage
point is referred to as a basis point. The company's management stated that the rate of increase in raw
material costs was the highest in forty years and that they anticipate this trend to continue in the near
future.
Nearly 70% of the profit pool, 80% of the customer mindshare, and 60% of the value market are all held by
Asian Paints. Although it only applies to one quarter, the over 1000bps gross margin reduction is
extraordinary. Although management mentioned "severe input cost inflation," we believe that Asian Paints'
key decision-making factors are maintaining lower profit pools and competitor signalling. Simply put, this
suggests that it might take a few more quarters for gross margins to fully recover, which might have an
impact on the company's projected earnings. The management stated that it anticipates improved operating
margins by 4QFY22 and plans to raise EBITDA margins to levels of 18-20 percent moving forward. Asian
Paints and the entire industry's future valuations may be at risk if there are prolonged periods of margin
degradation brought on by factors other than inflation.
As a result of the high standards and quality that the company upholds, Asian Paint's products cost more
than those of its competitors. The Royal product line is marketed to high-income consumers with premium
pricing. Asian Paints employs value-based pricing for the medium and economy segments. According to
the unique qualities of the product kind, the pricing also changes. The raw materials utilised to make those
paints have an impact on pricing decisions as well, thus price changes are sometimes seen. The business
gives incentives and volume discounts to its distributors for big volume sales as well as discounts to its
clients during bulk purchases. Therefore, Asian Paints' total price strategy in its marketing mix is based on
the quality of its products, the level of competition, and the solutions that customers want. When compared
to other paint service providers, the painting consulting services are more expensive.

In order to avoid burdening customers and lowering consumer demand, it is their duty as the industry
leader to absorb whatever amount of inflation is necessary. However, they will accept further hikes if
inflation actually does reach extremely high levels. If the inflation truly rises, they have to add some more
hikes down the road. We have recently seen price increases or the oil reaching high prices, and as the
prices of some crude derivatives rise, some prices on specific raw materials may decrease. Overall, we
therefore an inflationary environment nonetheless.
Projected Revenue Store Opening from 2022

120,000.00 300,000 23,391 25,000
108,118.75
21,268
100,000.00 250,000 19,339
88,385.15 17,584 20,000
15,989
80,000.00 72,022.43 200,000
Revenue in Crs
14,539
15,000
57,765.96
60,000.00 150,000
46,248.75
36,817.81 10,000
40,000.00 100,000
29,101.28
20,000.00 5,000
50,000
-
2022 2023 2024 2025 2026 2027 2028 - -
2022 2023 2024 2025 2026 2027 2028
Year
Number of stores New addition
Market share of APL Change in Volume Growth

70.00% 80% 15%
60% 61% 62%
58% 70% 13%
60.00% 55%
53% 60% 11%
50%
50.00% 50% RevenueReturn and7%Margin
Ratios
7% Growth
8% 8%
9% 9%
6%
40.00%
40%
35%30%
Trend 7%
5%
30.00% 20% 120,000.00 30% 40% 3%
30% 28%
10% 100,000.00
27% 35% 27%1%
20.00% 25%
25% 0% 30% -1%
22%
2022 2023 2024 2025 2026
80,000.00 21% 2027 202821%
10.00% 20% 21%25%
20% 18%
60,000.00 16%
Volume Growth 20%
INR Crs
0.00%
2022 2023 2024 2025 2026 2027 2028 15% 13% Change in volume growth 15%
%
12%
40,000.00
10%
10% 20,000.00 5%
5% - 0%
Revenue / Store Revenue/Litre
22 23 24 25 26 2of 7 APL
28
0% 20 Y20 Y20 Y20 Y20 Y20 Y20
0.45 FY FY2024
500FY2023
FY 2022 F F FY2025
F F FY2026
F F FY2027 40% FY2028
0.4 35%
400
Revenue/ Store in Cr
30%
Revenue/Litre
0.35 RevenueROA EBITDA

ROEMargin
% Change
300 25%
0.3 20%
0.25 200 15%
0.2 10%
0.15 100
5%
0.1 0 0%
0.05 2022 2023 2024 2025 2026 2027 2028
0 Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564
Year
2022 2023 2024 2025 2026 2027 2028
IOTA EQUITYYear
RESEARCH IS AVAILABLE ON www.iotaresearch.com/ Bloomberg
Revenue/L % Change
Paint demands continues to remain broad based and balanced
The Indian paint industry has seen a gradual shift in people's preferences from traditional whitewash to
high quality paints like emulsions and enamel paints, which is providing the basic stability for the
industry's growth. Furthermore, it is creating a highly competitive market in which players are employing
various strategies to capitalise on the growing market demand for a larger share. Furthermore, the rise in
disposable income of the average middle class, combined with increased investment in education;
urbanisation; rural market development; and various launches of many innovative products, such as
friendly, odour free, and dust & water-resistant paints, are major drivers propelling the growth of the Indian
paint market.
The Indian paints industry is expected to grow at a CAGR of around 10% from 2022 to 2025.
The decorative market is divided into several categories, including emulsion and enamel paints, distemper,
primer and thinner, and ancillary products. In 2019, decorative paint accounted for more than two-thirds of
the market, as demand for decorative paints is heavily influenced by the housing sector and the monsoon
season, whereas industrial paint demand is influenced by end-user industries such as automotive,
engineering, and consumer durables. Despite challenging inflation and geopolitical uncertainties, customer
confidence appears to be high in the new fiscal year. We anticipate strong consumer demand, and with
normal monsoons forecast, we anticipate a successful festival season. This year, Asian Paints was able to
expand its retail presence across emerging cities and ever-growing small towns by utilising allied delivery
channels and upgrading retailing formats to meet changing customer demands.
Asian Paints aspires to be one of the best providers in India in the Home Décor space, offering digital,
physical visualisation, and execution to its customers. We have been able to expand 'Beautiful Home
Stores' to various cities in order to ensure that customers receive the best in Home Décor. "We now have
29 stores and are rapidly expanding. Asian Paints' entry into the Bath and Kitchen market has gained
traction in the last two years, with exceptional revenue growth.
Asian Paints have looked at significantly expanding this business with innovations at the premium luxury
end in a strong manner. Kitchen and bath categories remain as a key focus in the Home Décor category
given the huge potential of housing in India supported by the Government as well.
Capacity and network expansion to meet growing demand

The Indian paint and coatings market is estimated to reach a value of USD 10,160.52 million by 2026. One
of the major drivers of this sector is the growing construction in the country. Architectural or industrial
paints and coatings account for around 35% share of the Indian market. The government’s ‘Housing for All

initiative’ aims at building more than 20 million homes for the urban poor by 2020, which will open more
projects for the paint industry.
With the growing demand across the industry, the company has been able to increase its capacity utilisation
across its manufacturing plants. The company’s existing units in India are mentioned below:
Location Capacity Type
Rohtak, Haryana 4,00,000 KL Decorative coatings
Kasna, Uttar Pradesh 80,000 KL Decorative coatings
Ankleshwar, Gujarat 1,30,000 KL Decorative coatings
Khandala, Maharashtra 3,00,000 KL Decorative coatings
Patancheru, Telangana 80,000 KL Decorative coatings
Visakhapatnam, Andhra 3,00,000 KL Decorative coatings
Pradesh
Mysuru, Karnataka 3,00,000 KL Decorative coatings
Sriperumbudur, Tamil Nadu 1,40,000 KL Decorative coatings
Cuddalore, Tamil Nadu 8,760 MT Chemical
Sarigam, Gujarat (Facility of 7,200 MT Industrial Coatings
Subsidiary company)
Taloja, Maharashtra 14,000 KL Industrial Coatings
During the FY2022, the company has started brownfield capacity expansion projects in the manufacturing
units of Ankleshwar, Kana and Khandala. In November 2021, the company has started expanding its
manufacturing unit in Ankleshwar, Gujarat from 130,000 KL to 250,000 KL paint capacity and resins and
emulsions capacity from 32000 MT to 85000 MT. The company has invested a total investment of Rs. 960
crores approximately for the expansion and is expected to be completed in two to three years. The company
has also planned to expand its Mysuru manufacturing unit. These capacity expansions are aimed at
improving the ability of the company to meet future demands in the domestic market. In order to meet the
demands of its international operations, APL has invested in setting up a second manufacturing unit in
Bangladesh. They have also invested in manufacturing facilities at Wada, Maharashtra for its Kitchen and
Bath Business.
APL is continuously increasing its urban footprint by expanding into major cities, suburbs, and Tier 3/4
towns. It has over 145000 retail touch points across the country and during the first quarter of FY22, the
company has added 5000 more retail touch points and planning to add atleast 5000 retail points every year.
 T1/T2 centres kept expanding faster than T3/T4 centres. Due to price hikes, the premium category is
expanding more quickly in T1/T2 centres while down-trading is evident in T3/T4 centres.
 The project-related industry has also aided in growth of APL. The B2B sector contributes around 15 to
25 % of APL's revenue. The markets for premium emulsion and water-proofing have expanded more
rapidly.
 With new dealers and markets emerging and population and consumption increasing, there will be no
saturation in dealer touch points for the next 5 to 10 years for APL.
R&D arm to guide Revenues
Asian Paints' Research & Technology team is a mission-driven organisation that consistently achieves
breakthroughs in product innovation while also working closely with all other internal stakeholders to

create value for the organisation as a whole. Their goal as creators is to constantly empower Asian Paints
through the power of science. It continues to place a strong emphasis on intellectual property (IP) and has
filed a total of 54 patents, 14 of which were in the current fiscal year. A total of 12 publications from the
Company's researchers have appeared in prestigious national/international journals.
The entire 'Breakthrough Innovation' programme has created a massive ripple and transformation not only
at the Research & Technology function, but also throughout the organisation. Last year, the breakthrough
innovation project 'Misaal' created some ground-breaking products and chemistries in its fifth avataar.
These included two products, Hypertron and Ultron, with a novel cost-effective polyurea chemistry, a first
in the French polish category for wood, entry into admixtures with very different chemistries, and
disruption in the adhesive white glue category through a combination of novel product and packaging
innovation.
When it comes to providing learning and development opportunities for its employees, Asian Paints has
always been at the forefront. A dedicated training academy known as 'Sikshalaya' has been established at
the Research & Technology Centre, with a focus on upgrading employees' technical skills and expanding
in-house expertise to many more individuals. This year, a new cutting-edge infrastructure was built to
provide the most recent learning technology tools and to improve participants' learning experiences. This
year, the academy hosted 13 workshops in various fields of science and technology to help employees
improve their technical skills. Three of these workshops were created and delivered specifically for Asian
Paints by renowned academic experts from India and abroad.
A cutting-edge Waterproofing, Hygiene, and Application Experiential Zone has been established at the
Navi Mumbai Research & Technology facility. The experiential zone features various interactive displays

of the Company's waterproofing system solutions and adhesive product range, as well as miniature models
of laboratory test equipment available at the Research & Technology facility. A section for mechanised
tools emphasises our commitment to providing customers with faster and smoother finishes. This zone was
created and dedicated specifically to architects, applicators, waterproofing contractors, and engineers to
provide them with a guided tour of Asian Paints' products and solutions. Furthermore, the testing
equipment displays help them understand and appreciate Asian Paints' rigorous testing regime when
developing products and solutions.
The Company's two new factories in Mysuru and Visakhapatnam have begun operations and have met their
environmental and sustainability goals.
FINANCIALS AND VALUATION

Income statement (all values in INR Crore) 2018 2019 2020 2021 2022 2023 2024
Revenue from operations
Revenue from sale of products 16,963 19,091 20,026 21,440 28,830 36,818 46,249
Revenue from sale of service 75 81 22 45 93
Other operating revenue 224 178 163 228 178
Other income 221 227 304 303 380 380 380
Total Income 17,483 19,577 20,516 22,016 29,481 37,198 46,629
Expenses
Cost of material consumed 8,585 10,357 10,092 10,317 16,255 23,195 26,824
Purchases of stock in trade 964 1,279 1,531 1,873 3,371
Changes in inventory of finished goods 142 -293 -239 -92 -1,325
Excise duty 438 8
Employee benefit expense 1,115 1,270 1,366 1,541 1,787 2,393 3,145
Other expenses 2,820 3,205 3,300 3,219 4,210 5,580 6,994
Total Expenses 14,065 15,825 16,049 16,857 24,298 31,168 36,964
EBITDA 3,418 3,752 4,466 5,159 5,184 6,030 9,665
Finance costs 35 51 102 92 95 4 6
Depreciation and amortization expense 360 431 781 791 816 985 1,275
Profit before share of profit in associate and exceptional
3,023 items
3,270 3,583 4,276 4,272 5,041 8,385
Share of profit in associate 46 41 51 29 32
Profit before exceptional item and tax 3,068 3,311 3,634 4,304 4,303 5,041 8,385
Exceptional items 116
Profit before tax 3,068 3,311 3,634 4,304 4,188 5,041 8,385
Tax expense
Current tax 1,041 940 945 1,114 1,162
MAT credit utilised/paid 1
MAT credit entitlement of earlier years
Short/(Excess) tax provision for earlier years -1 2 5 8 3
Deferred tax 0 156 -95 -24 -61
Total tax expense 1,041 1,099 855 1,098 1,103 1,512 2,515
Profit from Continuing Operations 2,028 2,212 2,779 3,207 3,085 3,529 5,869
(Loss)/Profit before tax from discontinued operations
71 -6
Tax (benefit)/expense of discontinued operations 1 -1
(Loss)/Profit from discontinued operations 70 -5
Profit after tax 2,098 2,212 2,774 3,207 3,085 3,529 5,869
Balance sheet

Particulars 2018 2019 2020 2021 2022 2023 2024
ASSETS
Non-current assets
Property, plant and equipment 3,118 5,256 4,765 4,476 4,184 4,202 5,346
Right to use assets 920 846 906 906 906
Capital work-in-progress 1,405 210 140 183 426 426 426
Goodwill 327 321 320 303 243 243 243
Other Intangible assets 287 274 267 234 186 - -
Financial assets
Investments in associate 366 407 457 484 515 515 515
Other Investments 718 988 1,050 986 551 551 551
Loans 81 79 68 62
Trade recievables 6 6 4 3 2 2 2
Other financial assets 151 227 248 532 486 486 486
Deferred tax Assets (Net) 20 28 17 14 26 26 26
Current Tax Assets (Net) 68 159 253 152 172 172 172
Other non-current assets 321 73 65 68 133 133 133
Total non current assets 6,869 8,027 8,575 8,343 7,832 7,664 8,808
Current assets
Inventories 2,658 3,150 3,390 3,799 6,153 8,070 10,137
Financial assets
Investments 1,057 1,175 512 3,267 2,181 2,522 3,168
Trade recievables 1,731 1,907 1,795 2,602 3,871 5,144 6,462
Cash and cash equivalent 312 276 564 346 622 2,173 4,600
Other balance with banks 93 169 219 264 243 243 243
Loans 13 16 19 18 - -
Other financial assets 581 526 782 1,180 1,534 1,917 2,407
Assets classified as Held for Sale 15 15 14 13 8 8 8
Other current assets 455 401 286 537 541 605 760
Total current assets 6,914 7,634 7,580 12,027 15,152 20,681 27,785
TOTAL ASSETS 13,783 15,661 16,155 20,370 22,984 28,345 36,593
EQUITY
Eqyuity share capital 96 96 96 96 96 96 96
other equity 8,314 9,424 10,034 12,710 13,716 17,244 23,113
Equity attribuable to owner of the company
8,410 9,520 10,130 12,806 13,812 17,340 23,209
non controlling interest 328 363 404 423 388 318 256
Total Equity 8,738 9,883 10,534 13,229 14,199 17,658 23,465
LIABILITIES
Non current Liabilities
Financial liabilities
Borrowings 28 19 19 15 45 35 47
Lease liabilities 590 561 598 598 598
Other financial liabilities 5 4 3 3 2 2 2
Provisions 140 156 181 215 218 218 218
Deferred tax liabilities (Net) 417 568 444 416 349 349 349
Other Non-Current Liabilities 4 3 5 5 2 2 2
Total non current liabilities 594 750 1,241 1,215 1,214 1,205 1,217
Current Liabilities
Financial Liabilities
Borrowings 492 597 321 326 731 1,210 1,521
Lease Liabilities 174 183 213
Trade payables
Total outstanding dues of msme 40 61 61 92 84 5,044 6,335
Total outstanding dues of creditors
2,120 2,333 2,076 3,287 4,081
Other financial liabilities 1,364 1,651 1,374 1,603 1,887 2,522 3,168
Other current liabilities 283 164 132 230 376 454 570
Provisions 57 76 62 84 70 101 127
Current tax liabilities (Net) 95 146 180 121 130 151 190
Total Current liabilities 4,451 5,029 4,380 5,926 7,571 9,482 11,911
TOTAL EQUITY AND LIABILITIES 13,783 15,661 16,155 20,370 22,984 28,345 36,593
Financial Ratios

Particulars Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24

Profitability Ratios
EBITDA Margin 19.80% 19.39% 22.10% 23.76% 17.81% 16.38% 20.90%
EBIT Margin 17.71% 17.16% 18.24% 20.11% 15.01% 13.70% 18.14%
Net Profit Margin 12.15% 11.43% 13.73% 14.77% 10.60% 9.58% 12.69%
Return on Asset 15.22% 14.12% 17.17% 15.74% 13.42% 12.45% 16.04%
Return on Equity 24.00% 22.38% 26.34% 24.24% 21.73% 19.98% 25.01%
Efficiency Ratios
Asset Turnover (times) 1.25 1.24 1.25 1.07 1.27 1.3 1.26
Receivable days 37 36 32 44 49 51 51
Payable days 46 45 39 57 52 50 50
Inventory days 56 59 61 64 77 80 80
Liquidity Ratio
Current Ratio 1.55 1.52 1.73 2.03 2 2.18 2.33
Quick Ratio 0.96 0.89 0.96 1.39 1.19 1.33 1.48
Solvency Ratio
Debt to Equity Ratio 0 0 0 0 0 0 0
Debt to Capital Ratio 0.003 0.002 0.002 0.001 0.003 0.002 0.002
Premium valuation is justified by the company's leadership position, strong balance sheet, and strong
dividend payout. APL's premium valuation is justified by its leadership position in the domestic decorative
paints industry, focus on becoming a leading player in the home improvement segment, strong balance
sheet, and strong dividend payout. In the short to medium term, sustained product launches, distribution
reach expansion, and a shift from unbranded to branded products will be key growth levers.
Risk
Even though the stock may remain sideways in the short future, given the high level of noise surrounding
new competitors (Grasim, JSW, Astral, and JK) entering the segment, new players have always struggled
to progress beyond a certain threshold of sales, given the industry's oligopolistic nature. Even if new

competitors disrupt the existing structure, they are most likely PV of explicit CF 51671
to take market share from challengers (Berger, Kansai, and PV of terminal value 319015
Akzo), while APNT maintains its market share. Total 370686
Slowdown: Any type of slowdown will have a direct negative Add: C &CE 622
impact on the economy, affecting the construction industry
and, ultimately, the paint industry and Asian paints. Because Total equity value 371307
Cost of equity 13.50%
the majority of the raw materials used to manufacture paint are
Terminal growth rate 10.00%
imported, the company suffers losses due to a pandemic,
Number of shares 959197790
country tensions, and other factors.
Value per share 3871
COMPANY PROFILE CMP 3568
VISION
Clear Goals for Clear Future
“To be the fore runner of inspiring décor and to actively empower customers to create their dream
homes”
Since its humble beginnings in 1942, the company has come a long way. It was founded as a partnership
firm by four friends who were eager to compete with the world's largest and most well-known paint
companies operating in India at the time. Asian Paints grew to become a corporate force and India's leading
paints company over the course of 25 years. Since 1967, the company has been the market leader in paints
due to its strong consumer focus and innovative spirit. It is now twice the size of any other paint company
in India. Asian Paints manufactures a wide range of decorative and industrial paints, as well as wall
coverings, adhesives, and services.
Recently, the company reached an agreement with Weatherseal Fenestration to acquire a 51% stake.
Weatherseal, if incorporated in March 2022, would be in the interior decoration/furnishing business,
including the manufacture of uPVC windows and door systems. Asian Paints has also reached an
agreement to acquire a 49% stake in Obgenix Software, also known as White Teak. White Teak is in the
business of selling decorative lighting and fans

BOARD OF DIRECTORS

MILESTONES
 1st February, 1942 – Suryakant C. Dani, Champaklal H. Choksey, Arvind R. Vakil, and Chimanlal
N. Choksi form the 'Asian Oil & Paint Company.'
 1945 – Asian Paints introduces small paint packs to serve the rural population and earns
Rs.3,50,000 in revenue.
 1954 – Gattu, the mischievous child, is Asian Paints' new mascot.
 1965 – The name of the company was switched from 'Asian Oil & Paint Company' to 'Asian Paints.'
 1967 – Asian Paints has risen to the top of the Indian paint industry.
 2004– Asian Paints is the only paint company to receive the Forbes Best Under a Billion Company
award.
 2005– The British Safety Council has awarded the 'Sword of Honour' to four Asian Paints plants.
 2006– Asian Paints' consolidated turnover exceeds Rs.3000 crore.
 2010– Asian Paints has begun production at its new facility in Rohtak, Haryana.
 2011– Asian Paints has partially reopened two plants of its Egyptian subsidiary that had been
closed due to a prolonged curfew.
 2014– Asian Paints increased its stake in Berger International to approximately 96.7 percent and
delisted the company from the Singapore Stock Exchange.
 2018 - Coatings World - Top Companies Report 2018 ranked Asian Paints ninth among many of
the world's top paint businesses.
 2021- Asian Paints has signed a Memorandum of Understanding with the Government of Gujarat to
begin the planned expansion of paint production capabilities from 130,000 KL to 250,000 KL, as
well as resins and emulsions manufacturing capability from 32000 MT to 85000M.
COMPETITOR ANALYSIS: ASIAN PAINTS CONTINUES TO BE A LEADER IN PAINT

INDUSTRY ACROSS PARAMETERS
Peer Comparison

Source: Money control
1 in Number of dealers across players 1 player in the paint industry by revenue (INR Cr)
Revenue (INR Cr)

930.00
3,171.30 916.87
5,981.76
16 6,000.00
EBITDA (INR Cr)
29,101.28
14 7,804.05
5,000.00
12
4,000.00
10
8 3,000.00
6 Asian Paints Berger Paints Kansai Nerolac
2,000.00
4 Akzo Nobel Indigo Paints Nippon Paint
1,000.00
2
Asian Pints has the best operating margins in industry
0 -
Asian Berger Kansai Akzo Indigo Nippon
Paints Paints Nerolac Nobel Paints Paint

PAT across players
3,500.00 3084.81
3,000.00
2,500.00
2,000.00
1,500.00
INR Crs
1,000.00 749.86
500.00 152 74.25 84.05 70.23
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Sensitivity Analysis
Terminal Growth Rate
799 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%

Cost Of 751.389 763.186 776.949 793.214 812.732 836.588 866.407
Equity 11.00% 8 5 3 5 7 2 7 904.747
723.362 733.292 758.115 773.911 792.867 816.036 844.996
11.50% 9 2 744.749 3 9 8 1 5
697.671 706.110 715.755 726.883 739.866 755.210 773.622 796.126
12.00% 9 9 4 6 6 1 3 1
673.958 689.389 709.569 722.181 737.087 754.973
12.50% 5 681.192 9 698.759 5 7 1 5
651.941 658.188 673.180 682.283 692.786 705.040 719.521
13.00% 2 2 665.216 9 6 7 4 9
631.395 636.826 649.725 657.465 666.310 676.516 688.422
13.50% 7 9 642.897 9 3 3 2 9
612.140 616.890 622.168 628.067 634.704 642.225 650.821 660.739
14.00% 5 8 9 9 3 6 3 5
594.026 602.820 607.950 613.684 620.134 627.444 635.799
14.50% 7 598.204 9 9 4 6 8 3
576.930 580.622 584.682 589.170 594.157 599.730 606.000 613.106
15.00% 9 3 8 8 4 7 7 6
560.749 564.026 571.562 575.925 580.773 586.191 592.287

15.50% 7 3 567.615 6 7 6 8 3
Key points to consider

Beta one year 0.82
Beta two year 0.75 Risk free rate 7.50%
Beta five year 0.70 Market return 15%
Research analyst: Iota research
( contact@iotaresearch.in)
Cost of equity
l +22- 20567236, +22-76678564 13.50%
INVESTORS ARE ADVISED
Five year beta from yahoo finance TO REFER TO IMPORTANT
0.39 DISCLOSURES MADE IN THE REPORTS
Beta from money control 0.82
Key Assumptions
Represented
Particulars in 2022 2023E 2024E 2025E
Total No of Stores(Distributors, Idea

store, Home store) Numbers 1,45,479.00 1,60,018.00 1,76,007.00 1,93,591.00
Installed capacity KL 17,30,000.00 17,30,000.00 20,00,000.00 20,00,000.00
Market share of Asian Paints Percentage 0.5 0.53 0.55 0.58
Volume Growth Percentage 31% 37% 44% 51%
Revenue/20L INR 3,364.31 4,256.39 4,624.87 5,776.60
Depreciation and amortization

expense Percentage 11% 11% 11% 12%
Interest cost as % of debt lease

liabilities Percentage 15% 12% 12% 12%
Tax expense as percentage of PBT Percentage 30% 30% 30% 30%


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Asian Paints Ltd Research

Booming Volume and demand Reinforce decorative margins

R&D arm to guide Revenues The entire 'Breakthrough Innovation'

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Indian Paint Industry

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Drivers of the Industry

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

 Leading player in the domestic

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Projected Revenue Store Opening from 2022

Market share of APL Change in Volume Growth

0.35 RevenueROA EBITDA

Capacity and network expansion to meet growing demand

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

R&D arm to guide Revenues

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

FINANCIALS AND VALUATION

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Akzo), while APNT maintains its market share. Total 370686

COMPANY PROFILE CMP 3568

Clear Goals for Clear Future

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

COMPETITOR ANALYSIS: ASIAN PAINTS CONTINUES TO BE A LEADER IN PAINT

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Revenue (INR Cr)

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

Terminal Growth Rate

799 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%

560.749 564.026 571.562 575.925 580.773 586.191 592.287

Key points to consider

Total No of Stores(Distributors, Idea

Installed capacity KL 17,30,000.00 17,30,000.00 20,00,000.00 20,00,000.00

Market share of Asian Paints Percentage 0.5 0.53 0.55 0.58

Volume Growth Percentage 31% 37% 44% 51%

Revenue/20L INR 3,364.31 4,256.39 4,624.87 5,776.60

Depreciation and amortization

Interest cost as % of debt lease

Tax expense as percentage of PBT Percentage 30% 30% 30% 30%

Research analyst: Iota research ( contact@iotaresearch.in) l +22- 20567236, +22-76678564

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