Aditya DagaAnwesha sahaAnanya bhattacharyyaNishad ShaikMridul Agarwal

Asian PaintsFounded in 1942Largest in India and third largest in AsiaAnnual Turnover 127.15 billion INRProducts: Interior and exterior paints, metal and wood finishes and waterproofing with a variety of effects to choose from

Performance Measure 2013-14 Growth over last yearEBITDA (Rs. Cr) 10419 16%PAT (Rs. Cr) 1169 11%Cash flow from operations (Rs. Cr) 1813 22%

Asian Paints - segments

Operations

Economic EnvironmentThe April-June 2014 period saw improvement in the global macroeconomic environment.The Eurozone also showed signs of improvement but slowlyIn international markets, concerns around political uncertainty and currency depreciation risk in Egypt, Jamaica and Bangladesh The domestic economy exhibited mixed signals due to

The strong electoral mandate at the center resulted in uplift of sentiments in the economyThe rupee which was depreciating during this time last year, has now recovered and is comparatively stable

Growth at decadal lows, from 8% levels in 2004 to below 5% in FY 2013-2014Inflation continues to prevail and remains at the higher end of the comfort zone. This affects demand and consumption

Industry DynamicsPaint industry grows at 1.5 to 2 times the GDP growth rateMarket share – 65% organized sector

35% Unorganized sector2 major segments – Decorative -75% of revenue

- Industrial – 25% of revenueIndustry was largely dominated by wholesalers distributing products of multinational companies.

Competitor Analysis

Market leader in the paint industry with a 55% market share

Major competitors Berger Paints, Nerolac Paints, Akzo Nobel India

Competition from the unorganized sector accounting for 35% of the

paint market

Competitor Analysis

Peer Comparison Asian Paints BergerPaints Kansai Nerolac Paints Akzo Nobel India

Revenue 12714.81 3,869.72 3,183.12 906.34

Operating Profit Margin 17.05% 11.51% 11.54% 7.93%

EBITD 1984.66 432.71 372.52 248.7

PAT Margin (%) 11.03% 6.90% 6.51% 6.06%

EPS 12.45 6.76 40.58 36.56

P/E 51.34 52.07 45.26 34.26

P/BV 17.03 11.11 6.95 6.89

ROCE 47.75% 25.22% 20.84% 24.16%

Consistent performance

Sustained value creation

Moat – Asian Paints

There are 2 moats of the company- Branding- Distribution Network

Branding as MoatGood customer recall – “Har ghar kuch kehta hai”, “Har rang kuch kehta hai”Established brands like Royale, Ultima, Ace, Apex and Tractor“Smart choice” campaign on tractor emulsionRelaunch of “apcolite” with rahul dravid as brand ambassadorUltra luxury royal Aspira launched across India Annual expenditures on advertising: 4% of its salesLaunched Apcolite advanced to bridge gap between Apcolite premium emulsion and Royale at economic price

Distribution as Moat

Distribution Network Installed more than 3200 colour worlds; total 27000 colour world dealers now Launch of ‘Ezycolour’ store in Kolkata Launched 70 new Colour Ideas store during the year 2013-14 Bypassed the wholesalers and directly to retailers 20% revenue from international market such as Middle East,

Caribbean and South East Asia High penetration in rural areas as compare to its competitors

Growth Drivers Usage of correct painting system Increased disposable income Easy home and vehicle loans Efficient distribution network with increased presence in the rural sector

Risks and ConcernsLimited presence in the industrial paint segmentDriven by seasonal effectsConstantly changing customer tastes and perceptionsRegulated by stringent environmental policiesVolatility in raw material costs

Corporate News and EventsAsian Paints completes acquisition of Ess Ess Bathroom Products on 11 June 2014.

Asian Paints to acquire 51% stake in kadisco Chemical Industry PLC, Ethiopia

EPV

ABV & NAV