4QFY2016 Result Update | FMCG
May 12, 2016
Asian Paints
NEUTRAL
CMP
`927
Performance Highlights
Target Price
-
Quarterly Data
Investment Period
-
(` cr)
4QFY16
4QFY15
% yoy
3QFY16
% qoq
Revenue
3,971
3,535
12.3
4,160
(4.5)
Stock Info
EBITDA
704
558
26.2
748
(5.9)
Sector
FMCG
Margin (%)
17.7
15.8
195bp
18.0
(26bp)
Market Cap (` cr)
88,894
Adj. PAT
409
343
19.3
499
(18.0)
Net Debt (` cr)
(2,203)
Source: Company, Angel Research
Beta
0.8
52 Week High / Low
932 / 693
Asian Paints posted a healthy performance for 4QFY2016, both on the top-line as
Avg. Daily Volume
78,510
well as the bottom-line front. For the quarter, the company’s top-line grew by
Face Value (`)
1
12.3% yoy to `3,971cr while the reported PAT grew 19.3% yoy to `409cr.
BSE Sensex
25,790
Key highlights: For 4QFY2016, Asian Paints’ consolidated top-line posted a
Nifty
7,900
Reuters Code
ASPN.BO
growth of 12.3% yoy to `3,971cr on the back of double-digit growth in domestic
Bloomberg Code
[email protected]
decorative paints. The company witnessed demand improvement in industrial
paints and powder coatings. On the international front, Oman, and Bahrain did
not perform well as subdued oil prices hurt their economies while UAE too was
Shareholding Pattern (%)
short on performance.
Promoters
52.8
MF / Banks / Indian Fls
14.8
On the operating profit front, the company reported a growth of 26.2% yoy on the
FII / NRIs / OCBs
19.4
back of healthy sales growth and lower material prices. The operating profit
Indian Public / Others
13.0
margin was up by 195bp yoy to 17.7% helped by easing material prices. During
the quarter, the company reported an adjusted net profit of 19.3% yoy to `409cr.
Abs. (%)
3m
1yr
3yr
Sensex
12.2
(4.0)
31.0
Outlook and valuation: We expect Asian Paints to post a ~13% and ~9% CAGR
Asian Paints
8.5
22.5
97.5
in its top-line and bottom-line respectively, over FY2016-18E. At the current
market price, the stock is trading at 42.1x its FY2018E earnings. We maintain our
3-year price chart
Neutral view on the stock.
1000
900
Key financials (Consolidated)
800
Y/E March (` cr)
FY2015
FY2016
FY2017E
FY2018E
700
600
Net sales
14,183
15,534
17,445
19,957
500
400
% chg
11.6
9.5
12.3
14.4
300
200
Adj. Net profit
1,414
1,762
1,881
2,110
100
0
% chg
15.4
24.6
6.7
12.2
EBITDA margin (%)
15.6
17.7
16.8
16.4
EPS (`)
14.7
18.4
19.6
22.0
Source: Company, Angel Research
P/E (x)
62.9
50.5
47.3
42.1
P/BV (x)
18.7
17.8
16.8
15.8
RoE (%)
29.4
34.6
35.6
37.5
RoCE (%)
37.6
46.6
46.7
49.5
Amarjeet S Maurya
EV/Sales (x)
6.2
5.6
5.0
4.3
022-39357800 Ext: 6831
EV/EBITDA (x)
39.7
31.5
29.6
26.5
[email protected]
Source: Company, Angel Research; Note: CMP as of May 12, 2016
Please refer to important disclosures at the end of this report
1
Asian Paints | 4QFY2016 Result Update
Exhibit 1: Consolidated quarterly performance
Y/E March (` cr)
4QFY16
4QFY15
% yoy
3QFY15
% qoq
FY2016
FY2015
% chg
Net Sales
3,971
3,535
12.3
4,160
(4.5)
15,534
14,183
9.5
Consumption of RM
2,027
1,942
4.4
2,200
(7.9)
8,206
7,971
2.9
(% of Sales)
51.0
54.9
52.9
52.8
56.2
Staff Costs
277
216
27.8
247
12.0
1,018
932
9.2
(% of Sales)
7.0
6.1
5.9
6.6
6.6
Other Expenses
964
819
17.7
965
(0.1)
3,555
3,071
15.7
(% of Sales)
24.3
23.2
23.2
22.9
21.7
Total Expenditure
3,268
2,978
9.7
3,412
(4.2)
12,778
11,975
6.7
Operating Profit
704
558
26.2
748
(5.9)
2,756
2,208
24.8
OPM
17.7
15.8
18.0
17.7
15.6
Interest
15
10
44.9
8
94.1
41
35
16.5
Depreciation
75
67
12.1
73
3.8
288
266
8.3
Other Income
34
42
(18.4)
36
(5.1)
201
170
18.3
PBT (excl. Ext Items)
648
522
24.1
704
(8.0)
2,628
2,077
26.6
Ext (Income)/Expense
-
-
-
-
PBT (incl. Ext Items)
648
522
24.1
704
(8.0)
2,628
2,077
26.6
(% of Sales)
16.3
14.8
16.9
16.9
14.6
Provision for Taxation
225
170
229
849
650
30.7
(% of PBT)
34.8
32.5
32.5
32
31
Reported PAT
422
352
20.0
475
(11.1)
1,779
1,427
24.7
PATM
10.6
10.0
11.4
11.5
10.1
Minority Interest After NP
13.5
11.0
11.7
53.1
32.2
Extra-ordinary Items
-
(2)
(35)
(36)
(19)
Reported PAT
409
343
19.3
499
(18.0)
1,762
1,414
24.6
Equity shares (cr)
96
96
96
96
96
FDEPS (`)
4.3
3.6
19.3
5.2
(18.0)
18.4
14.7
24.6
Source: Company, Angel Research
May 12, 2016
2
Asian Paints | 4QFY2016 Result Update
Healthy top-line growth
For 4QFY2016, Asian Paints’ consolidated top-line posted a growth of 12.3% yoy
to `3,971cr on the back of double-digit growth in domestic decorative paints. The
company witnessed demand improvement in industrial paints and powder
coatings. On the international front, Oman, and Bahrain did not perform well as
subdued oil prices hurt their economies while UAE too was short on performance.
Exhibit 2: Top-line growth trend
4,500
14
4,000
12
3,500
10
8
3,000
6
2,500
4
2,000
2
1,500
-
1,000
(2)
500
(4)
0
(6)
Net Sales
QoQ growth (%)
Source: Company, Angel Research
Operating margin up due to lower material prices
On the operating profit front, the company reported a growth of 26.2% yoy
supported by healthy sales growth and lower material prices. The operating profit
margin was up by 195bp yoy to 17.7% due to easing material prices.
Exhibit 3: Operating profit and margin trend
800
20
18
700
16
600
14
500
12
400
10
8
300
6
200
4
100
2
0
0
Operating Profit
Margin (%)
Source: Company, Angel Research
May 12, 2016
3
Asian Paints | 4QFY2016 Result Update
Adjusted PAT grew 19.3% yoy
The company reported an adjusted net profit of 19.3% yoy to `409cr for the
quarter.
Exhibit 4: Net Profit and growth trend
600
40
500
30
20
400
10
300
-
200
(10)
100
(20)
0
(30)
Net Profit
QOQ growth (%)
Source: Company, Angel Research
May 12, 2016
4
Asian Paints | 4QFY2016 Result Update
Investment rationale
Market leadership in India
Asian Paints is the largest paint company in India with a leadership position in the
decorative paint segment and with a market share in excess of 50%. The overall
weak demand environment in the economy has been impacting the domestic
decorative paint market in the recent past. We believe that with gradual recovery in
the economy, coupled with increased focus of the government on infrastructure
spending, Asian Paints would stand to benefit given its strong brand equity and
vast dealer network.
Stable raw material prices to aid margin
Since raw materials consumed by the company are mainly crude derivatives, soft
crude prices are positive for the company. We believe that with oil prices likely to
be stable at current levels in the near term, Asian Paints’ margins would likely
expand.
Outlook and valuation
We expect Asian Paints to post a ~13% and ~9% CAGR in its top-line and
bottom-line respectively, over FY2016-18E. At the current market price, the stock is
trading at 42.1x its FY2018E earnings. We maintain our Neutral view on the stock.
Company background
Asian Paints is India's largest paint company, with a market share of ~50%. The
company is mainly present in the decorative segment, which contributes over 75%
of its sales. The company features among the top 10 decorative paint players
globally. It has a large distribution network of over 25,000 dealers and 27,000
'Colour World' outlets across India. The company's international revenue comes
from countries in the Caribbean, Middle East, South Pacific and Asian regions.
May 12, 2016
5
Asian Paints | 4QFY2016 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016
FY2017E
FY2018E
Total operating income
10,939
12,715
14,183
15,534
17,445
19,957
% chg
13.6
16.2
11.6
9.5
12.3
14.4
Total Expenditure
9,207
10,727
11,976
12,778
14,514
16,684
Raw Materials
6413
7341
7972
8206
9420
10777
Personnel Expenses
624
760
907
1,018
1,221
1,437
Others Expenses
2,170
2,626
3,096
3,555
3,873
4,470
EBITDA
1,732
1,988
2,208
2,756
2,931
3,273
% chg
14.8
14.8
11.1
24.8
6.3
11.7
(% of Net Sales)
15.8
15.6
15.6
17.7
16.8
16.4
Depreciation& Amortisation
155
246
266
288
313
336
EBIT
1,577
1,742
1,942
2,468
2,617
2,937
% chg
13.7
10.5
11.5
27.1
6.0
12.2
(% of Net Sales)
14.4
13.7
13.7
15.9
15.0
14.7
Interest & other Charges
37
42
35
41
35
35
Other Income
114
134
170
201
230
250
(% of PBT)
6.9
7.3
8.2
7.6
8.2
7.9
Share in profit of Associates
-
-
-
-
-
-
PBT (reported)
1,655
1,834
2,077
2,628
2,812
3,152
Tax
496
572
650
849
872
977
(% of PBT)
29.9
31.2
31.3
32.3
31.0
31.0
PAT (reported)
1,160
1,263
1,427
1,779
1,941
2,175
Less: Minority interest (MI)
46
44
32
53
60
65
PAT after MI (reported)
1,114
1,219
1,395
1,726
1,881
2,110
Prior Period & Extra. Exp./(Inc.)
-
(7)
(19)
(36)
-
-
ADJ. PAT
1,114
1,226
1,414
1,762
1,881
2,110
% chg
12.7
10.0
15.4
24.6
6.7
12.2
(% of Net Sales)
10.2
9.6
10.0
11.3
10.8
10.6
Basic & diluted EPS (`)
11.6
12.8
14.7
18.4
19.6
22.0
Adjusted EPS EPS (`)
11.6
12.8
14.7
18.4
19.6
22.0
% chg
12.7
10.0
15.4
24.6
6.7
12.2
May 12, 2016
6
Asian Paints | 4QFY2016 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E
FY2017E
FY2018E
SOURCES OF FUNDS
Equity Share Capital
96
96
96
96
96
96
Reserves& Surplus
3,288
3,943
4,646
4,889
5,190
5,528
Shareholders Funds
3,384
4,039
4,742
4,985
5,286
5,624
Minority Interest
161
246
264
264
264
264
Total Loans
251
249
418
315
315
315
Deferred Tax Liability
195
231
247
247
247
247
Total Liabilities
3,991
4,765
5,671
5,810
6,111
6,449
APPLICATION OF FUNDS
Gross Block
3,429
3,804
4,112
4,442
4,772
5,102
Less: Acc. Depreciation
979
1,223
1,438
1,726
2,039
2,375
Less:Impairment of Assets
9
19
15
15
15
15
Net Block
2,441
2,562
2,660
2,702
2,719
2,713
Capital Work-in-Progress
59
72
196
196
196
196
Investments
296
1,424
1,588
2,098
2,098
2,098
Current Assets
3,989
4,019
4,468
4,650
5,439
6,377
Inventories
1,830
2,070
2,259
2,064
2,581
3,171
Sundry Debtors
981
1,110
1,180
1,234
1,386
1,586
Cash
737
229
204
420
460
463
Loans & Advances
313
454
511
621
698
798
Other Assets
128
156
315
311
314
359
Current liabilities
2,834
3,353
3,308
3,903
4,407
5,002
Net Current Assets
1,155
665
1,160
747
1,032
1,375
Deferred Tax Asset
41
43
67
67
67
67
Mis. Exp. not written off
-
-
-
-
-
-
Total Assets
3,991
4,765
5,671
5,810
6,111
6,449
May 12, 2016
7
Asian Paints | 4QFY2016 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E FY2017E FY2018E
Profit before tax
1,655
1,834
2,077
2,628
2,812
3,152
Depreciation
155
256
268
288
313
336
Change in Working Capital
(159)
(159)
(168)
(450)
628
(244)
Interest / Dividend (Net)
(7)
(10)
(37)
(47)
41
35
Direct taxes paid
(438)
(480)
(633)
(849)
(872)
(977)
Others
(19)
(39)
(320)
1,166
(878)
(96)
Cash Flow from Operations
1,187
1,402
1,188
2,736
2,045
2,205
(Inc.)/ Dec. in Fixed Assets
(522)
542
(301)
(343)
(344)
(345)
(Inc.)/ Dec. in Investments
59
(1,128)
(164)
(510)
-
-
Cash Flow from Investing
(463)
(586)
(465)
(853)
(344)
(345)
Issue of Equity
-
-
-
-
-
-
Inc./(Dec.) in loans
(102)
(37)
153
(103)
-
-
Dividend Paid (Incl. Tax)
(4,000)
(2,811)
(3,245)
(1,480)
(1,580)
(1,772)
Interest / Dividend (Net)
3,490
1,525
1,648
(84)
(81)
(85)
Cash Flow from Financing
(611)
(1,324)
(1,445)
(1,667)
(1,661)
(1,857)
Inc./(Dec.) in Cash
112
(508)
(722)
215
40
3
Opening Cash balances
624
737
926
204
420
460
Closing Cash balances
737
229
204
420
460
463
May 12, 2016
8
Asian Paints | 4QFY2016 Result Update
Key Ratios
Y/E March
FY2013
FY2014
FY2015
FY2016E FY2017E FY2018E
Valuation Ratio (x)
P/E (on FDEPS)
79.8
72.5
62.9
50.5
47.3
42.1
P/CEPS
67.7
58.9
52.5
43.0
39.5
35.4
P/BV
26.3
22.0
18.7
17.8
16.8
15.8
Dividend yield (%)
4.5
3.2
3.6
1.7
1.8
2.0
EV/Sales
8.1
6.9
6.2
5.6
5.0
4.3
EV/EBITDA
50.9
44.0
39.7
31.5
29.6
26.5
EV / Total Assets
12.9
10.8
9.7
8.9
8.2
7.6
Per Share Data (`)
EPS (Basic)
11.6
12.8
14.7
18.4
19.6
22.0
EPS (fully diluted)
11.6
12.8
14.7
18.4
19.6
22.0
Cash EPS
13.7
15.7
17.7
21.6
23.5
26.2
DPS
41.7
29.3
33.8
15.4
16.5
18.5
Book Value
35.3
42.1
49.4
52.0
55.1
58.6
Returns (%)
ROCE
43.4
40.6
37.6
46.6
46.7
49.5
ROE
32.9
30.2
29.4
34.6
35.6
37.5
Turnover ratios (x)
Asset Turnover (Gross Block)
3.2
3.3
3.4
3.5
3.7
3.9
Inventory / Sales (days)
61
59
58
49
54
58
Receivables (days)
33
32
30
29
29
29
Payables (days)
49
51
41
40
40
40
WC cycle (ex-cash) (days)
44
41
47
38
43
47
May 12, 2016
9
Asian Paints | 4QFY2016 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
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interest/beneficial ownership of more than 1% in the company covered by Analyst. Angel or its associates/analyst has not received any
compensation / managed or co-managed public offering of securities of the company covered by Analyst during the past twelve
months. Angel/analyst has not served as an officer, director or employee of company covered by Analyst and has not been engaged in
market making activity of the company covered by Analyst.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
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have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Hindustan Unilever
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15%)
May 12, 2016
10