key data revenue robust; cost inflationary

Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited

KEY DATA

Rating BUY Sector relative Outperformer Price (INR) 2,556 12 month price target (INR) 3,185 Market cap (INR bn/USD bn) 2,452/33.4 Free float/Foreign ownership (%) 47.2/19.8

What’s Changed Target Price

Rating/Risk Rating ⚊

QUICK TAKE

Revenue robust; cost inflationary

Asian Paints’ (APL) Q4FY21 consolidated revenue (up 43.5% YoY) beat our expectations, whereas EBITDA (up 53.4% YoY) and PAT (up 81.1% YoY) came below our estimates. The Decorative business clocked multi-quarter high volume growth (48% YoY on soft base of ~1% YoY) led by a strong performance in the premium and luxury portfolios. Inflation in raw material prices led to gross margin compression of

266bps YoY, however on a softer base. Meanwhile, cost optimisation and improvements in sourcing lifted EBITDA margin by 128bps YoY.

Overall, we believe APL’s operational prowess and market leadership will help it continue to drive volume growth. Maintain ‘BUY’ with a revised TP of INR3,185.

FINANCIALS (INR mn)

Year to March FY20A FY21E FY22E FY23E

Revenue 2,02,113 2,17,128 2,55,841 2,86,578

EBITDA 41,618 48,556 57,691 65,530

Adjusted profit 27,791 32,068 39,254 45,202

Diluted EPS (INR) 29.0 33.4 40.9 47.1

EPS growth (%) 25.6 15.4 22.4 15.2

RoAE (%) 28.3 28.0 28.3 27.9

P/E (x) 88.2 76.5 62.5 54.2

EV/EBITDA (x) 58.7 49.8 41.5 36.1

Dividend yield (%) 0.5 0.7 0.7 0.8

PRICE PERFORMANCE

Premium and luxury portfolios drive volumes

Standalone sales grew 46.2% YoY, continuing its impressive run. The domestic

decorative business delivered a stellar performance, registering 48% YoY volume

growth led by robust growth in the premium and luxury product range. The home

improvement business also clocked record sales aided by the home décor business

(EssEss’s revenue up 83.9% YoY and Sleek’s 78.1% YoY). The Industrial coatings

business delivered a solid performance in protective coatings and re-finish segments

supported by the uptick in industrial activity. The international business continued

to record exceptional double-digit volume growth, led by good growth in Asia and

the Middle East. All in all, with the demand momentum sustaining, we expect APL’s

strong double-digit volume growth in decorative business to sustain.

Q4FY21 conference call: Key takeaways

The company has taken a price hike of 2.8% effective May 1st. Tier 1 and 2 cities saw

a pick-up in demand from Q3-end onwards. Tier 3 and other areas continued their

strong momentum. The company is focusing on improving volumes and developing

the kitchen and bath business to complement its home décor business in the short

run and to gradually improve profitability over medium term.

Explore:

Outlook and valuation: Shining bright; maintain ‘BUY’

We expect double-digit growth in decorative volumes to sustain, riding the potential

demand shift from unorganised segment (~30%). This coupled with APL’s ability to

raise prices should help it maintain margin. Considering top-line outperformance, we

are raising the TP to INR3,185 (from INR3,140); retain ‘BUY/SO’ (54.2x FY23E EPS).

Financials Year to March Q4FY21 Q4FY20 % Change Q3FY21 % Change

Net Revenue 66,514 46,356 43.5 67,885 (2.0)

EBITDA 13,183 8,596 53.4 17,879 (26.3)

Adjusted Profit 8,699 4,803 81.1 12,654 (31.3)

Diluted EPS (INR) 9.1 5.0 81.1 13.2 (31.3)

Above In line Below

Profit

Margins

Revenue Growth

Overall

30,000

34,600

39,200

43,800

48,400

53,000

1,500

1,770

2,040

2,310

2,580

2,850

May-20 Aug-20 Nov-20 Feb-21 May-21

APNT IN Equity Sensex

India Equity Research Consumer discretionary May 12, 2021

ASIAN PAINTS RESULT UPDATE

Abneesh Roy Tushar Sundrani +91 (22) 6620 3141 +91 (22) 6620 3004 [email protected] [email protected]

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Financial Statements

Income Statement (INR mn) Year to March FY20A FY21E FY22E FY23E

Total operating income 2,02,113 2,17,128 2,55,841 2,86,578

Gross profit 88,278 96,156 1,13,666 1,28,984

Employee costs 13,661 15,408 17,262 19,385

Other expenses 23,824 24,361 28,367 32,017

EBITDA 41,618 48,556 57,691 65,530

Depreciation 7,805 7,913 8,660 9,160

Less: Interest expense 1,023 916 991 931

Add: Other income 3,043 3,031 4,011 4,498

Profit before tax 35,833 42,758 52,051 59,938

Prov for tax 8,549 10,976 13,377 15,404

Less: Other adj 0 0 0 0

Reported profit 27,791 32,068 39,254 45,202

Less: Excp.item (net) 0 0 0 0

Adjusted profit 27,791 32,068 39,254 45,202

Diluted shares o/s 959 959 959 959

Adjusted diluted EPS 29.0 33.4 40.9 47.1

DPS (INR) 12.0 17.9 18.4 21.2

Tax rate (%) 23.9 25.7 25.7 25.7

Important Ratios (%) Year to March FY20A FY21E FY22E FY23E

Other exp (% of rev) 11.8 11.2 11.1 11.2

Con A&P (% of rev) 4.5 3.6 4.0 4.2

Gross margin (%) 43.7 44.3 44.4 45.0

EBITDA margin (%) 20.6 22.4 22.5 22.9

Net profit margin (%) 13.8 14.8 15.3 15.8

Revenue growth (% YoY) 4.5 7.4 17.8 12.0

EBITDA growth (% YoY) 18.1 16.7 18.8 13.6

Adj. profit growth (%) 25.6 15.4 22.4 15.2

Assumptions (%) Year to March FY20A FY21E FY22E FY23E

GDP (YoY %) 4.8 (6.0) 7.0 6.0

Repo rate (%) 4.4 3.5 3.5 4.0

USD/INR (average) 70.7 75.0 73.0 72.0

Sales growth std 5.1 2.0 22.0 12.0

Volume growth - std 10.5 6.0 22.0 13.0

COGS % of sales (con) 56.3 55.7 55.6 55.0

COGS % of sales (std) 55.3 54.5 54.7 54.2

Staff cost (% of rev) 6.8 7.1 6.7 6.8

Std A&P (% of rev) 4.6 3.5 4.3 4.5

Valuation Metrics Year to March FY20A FY21E FY22E FY23E

Diluted P/E (x) 88.2 76.5 62.5 54.2

Price/BV (x) 24.2 19.1 16.4 14.0

EV/EBITDA (x) 58.7 49.8 41.5 36.1

Dividend yield (%) 0.5 0.7 0.7 0.8

Source: Company and Edelweiss estimates

Balance Sheet (INR mn) Year to March FY20A FY21E FY22E FY23E

Share capital 959 959 959 959

Reserves 1,00,342 1,27,104 1,48,693 1,73,554

Shareholders funds 1,01,302 1,28,063 1,49,653 1,74,513

Minority interest 4,035 4,229 4,809 5,477

Borrowings 3,511 3,402 3,202 3,002

Trade payables 21,366 33,787 27,267 30,224

Other liabs & prov 23,383 26,228 26,228 26,228

Total liabilities 1,61,380 2,03,553 2,19,003 2,47,288

Net block 56,849 53,219 50,611 46,451

Intangible assets 5,875 5,366 5,366 5,366

Capital WIP 1,402 1,830 3,000 3,000

Total fixed assets 64,126 60,415 58,977 54,818

Non current inv 15,064 14,697 14,697 14,697

Cash/cash equivalent 12,953 38,779 60,268 86,005

Sundry debtors 17,994 26,051 22,430 25,125

Loans & advances 869 795 795 795

Other assets 50,374 62,818 61,836 65,849

Total assets 1,61,380 2,03,553 2,19,003 2,47,288

Free Cash Flow (INR mn) Year to March FY20A FY21E FY22E FY23E

Reported profit 27,791 32,068 39,254 45,202

Add: Depreciation 7,805 7,913 8,660 9,160

Interest (net of tax) 1,023 916 991 931

Others (507) (286) (580) (668)

Less: Changes in WC (3,837) 277 (1,919) (3,751)

Operating cash flow 32,275 40,888 46,406 50,873

Less: Capex (2,707) (5,427) (5,000) (5,000)

Free cash flow 29,568 35,460 41,406 45,873

Key Ratios Year to March FY20A FY21E FY22E FY23E

RoE (%) 28.3 28.0 28.3 27.9

RoCE (%) 34.5 35.7 36.2 35.7

Inventory days 105 108 96 90

Receivable days 34 37 35 30

Payable days 73 83 78 67

Working cap (% sales) 14.2 15.5 13.9 13.7

Gross debt/equity (x) 0 0 0 0

Net debt/equity (x) (0.1) (0.3) (0.4) (0.5)

Interest coverage (x) 33.0 44.4 49.5 60.6

Valuation Drivers Year to March FY20A FY21E FY22E FY23E

EPS growth (%) 25.6 15.4 22.4 15.2

RoE (%) 28.3 28.0 28.3 27.9

EBITDA growth (%) 18.1 16.7 18.8 13.6

Payout ratio (%) 41.4 53.4 45.0 45.0


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Trends at a glance

Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21

Domestic decorative volume growth (% YoY) ~10.5 ~16.0 14.0 11.0 ~1.0 (38.0) 11.0 33.0 48.0

Consolidated sales growth (% YoY) 11.9 16.9 9.4 2.4 (7.6) (42.7) 5.9 25.2 43.5

Consolidated gross margin (%) 41.6 43.5 42.4 43.0 45.8 44.7 44.4 45.1 43.2

Consolidated staff costs (% of revenue) 6.7 6.7 6.9 6.3 7.2 12.4 7.1 5.7 6.2

Consolidated other expenses (% of revenue) 18.5 14.3 16.7 14.7 20.1 15.8 13.7 13.0 17.2

Consolidated EBITDA growth (% YoY) (2.0) 24.4 13.0 14.0 (2.7) (58.2) 32.5 50.3 53.4

Consolidated EBITDA margin (%) 17.6 22.5 18.9 21.9 18.5 16.6 23.6 26.3 19.8

Standalone sales growth (% YoY) 12.2 18.2 9.3 2.7 (8.4) (44.1) 5.8 26.1 46.2

Standalone gross margin (%) 43.0 44.8 43.4 44.0 47.0 46.3 45.4 46.1 44.7

Standalone EBITDA growth (% YoY) (2.0) 25.2 12.4 13.4 (5.4) (57.2) 31.6 48.0 57.6

Standalone EBITDA margin (%) 18.2 24.9 20.4 24.0 20.0 19.1 25.4 28.2 21.6

Ess Ess revenue (INR mn) 589 512 585 590 508 257 555 726 934

Ess Ess revenue growth (%) 24.6 11.4 18.7 23.0 (13.9) (49.8) (5.1) 23.1 83.9

Ess Ess EBIT (INR mn) (34) (68) (81) (72) (73) (75) 1 10 (2)

Sleek revenue (INR mn) 602 566 625 672 520 264 619 808 925

Sleek revenue growth (%) 19.6 25.9 18.6 18.9 (13.7) (53.4) (1.0) 20.3 78.1

Sleek EBIT (INR mn) (104) (90) (75) (96) (149) (137) (43) (17) (150)

Source: Company

Segmental performance (consolidated)

Segment revenue (INR mn) Q4FY21 Q4FY20 YoY growth (%) Q3FY21 QoQ growth (%)

Paints 64,672 45,329 42.7 66,351 (2.5)

Home Improvement (both Sleek and Ess Ess) 1,859 1,027 81.0 1,534 21.2

Total 66,531 46,356 43.5 67,885 (2.0)

Segment PBIT (INR mn)

Paints 12,297 8,070 52.4 17,226 (28.6)

Home Improvement (both Sleek and Ess Ess) (151) (222) NM (8) NM

Total 12,146 7,848 54.8 17,218 (29.5)

PBIT margins (%)

Paints 19.0 17.8 121.1 26.0 -695

Home Improvement (8.1) (21.6) NM (0.5) NM

Total 18.3 16.9 132.6 25.4 -711

Source: Company

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Segmental performance (standalone)

Segment revenue (INR mn) Q4FY21 Q4FY20 YoY growth (%) Q3FY21 QoQ growth (%)

Paints 55,774 38,283 45.7 58,002 (3.8)

Home Improvement (only Ess Ess) 934 508 83.9 726 28.6

Total 56,708 38,790 46.2 58,728 (3.4)

Segment PBIT (INR mn)

Paints 11,756 7,418 58.5 16,139 (27.2)

Home Improvement (only Ess Ess) -2 (73) NM 10 NM

Total 11,754 7,346 60.0 16,148 (27.2)

PBIT margins (%)

Paints 21.1 19.4 169.9 27.8 -675

Home Improvement -0.2 (14.3) NM 1.3 NM

Total 20.7 18.9 179.0 27.5 -677

Source: Company

Q4FY21 conference call key takeaways

Overall

Total consolidated revenue increased by 43% YoY and EBITDA by 52% YoY with

an EBITDA margin expansion of 120bps YoY in Q4FY21.

Consolidated PAT surged by 81% YoY in Q4FY21.

Management mentioned that the repair cycles in their view have reduced from

6–7 years three years back to 4–5 years today.

Management saw sticky demand in the repair and renovation space, and a lot of

the demand was deferred to later part of Q3FY21 and Q4FY21.

Construction demand, which forms a major part of revenue, is dependent on an

uptick in real estate and is being watched closely by management.

Management believes that possible money constraints due to restrictions

coming up to combat the second wave might affect demand and the government

might have to step in to stimulate demand.

Domestic decorative business saw 48% YoY volume growth and 46% YoY value

growth in Q4FY21.

Tier 1 and 2 cities saw a pick-up in demand Q3-end onwards.

Tier 3 and other areas continued their strong momentum from previous quarter.

The quarter saw good volume growth each month and continuous improvement

in luxury product performance.

The company has paid dividends of INR17.85 per share giving a dividend payout

ratio of 56.1%.

Metro cities and tier 1 and 2 cities saw an uptick in performance, and the change

in product mix bought the volume and value growth gap to 2% for Q4FY21.

The company saw a 5% difference in value and volume growth for the whole year

FY21. Going ahead, management predicts the gap to hover within 3–5% in the

near term.

The company has gained most market share from the organised sector, and the

top 4 players during the first 9 months of the year FY21


ASIAN PAINTS


The company also gained some share from the unorganised sector, which faced

supply chain issues due to the pandemic during the year.

Management believes future volume growth will be driven by upgrading

consumer to emulsions, improved penetration in tier 3 and lower-tier regions,

gains from increased demand for undercoating and primers due to a general

decrease in construction quality.

International business

Asia, the Middle East and Africa businesses saw a robust performance.

All units posted a double-digit increase in revenue on a YoY basis.

Asia and Africa region saw dip of 51% YoY and 40% YoY, respectively, in PBT in

Q4FY21.

Ethiopia, Bahrain, Indonesia and South Pacific were the only exceptions.

Waterproofing and luxury emulsions did well in these markets.

The company introduced its Safe Painting service across markets, which gained

traction.

Institutional business

The auto sector showed some momentum in Q4FY21.

PPG-AP and AP-PPG saw 39% YoY growth and 63% YoY growth in revenues in

Q4FY21

Growth was led by Industrial liquid paints and powder segments.

Both PPG-AP and AP-PPG businesses took a hit on margins due to adverse

material prices.

Home improvement

Both components and full kitchens showed strong growth in Q4FY21, yielding

revenue growth of 84% YoY in the kitchen business for Q4FY21.

The projects segment uptick continued to Q4FY21.

Bath business saw revenue growth of 84% YoY in Q4FY21 led by a pick-up in

demand across segments.

Both kitchen (INR210mn loss in FY21 vs INR410mn loss in FY20) and bath

business (INR70mn loss in FY21 vs INR290mn loss in FY20) saw lesser PBT loss

levels for the overall year due to cost optimization and improving scale.

The company is focusing on improving volumes and developing the kitchen and

bath business to complement its home décor business in the short run and to

gradually improve profitability over medium term.

Margins

No price increase taken in Q4 so that the demand momentum is not affected,

despite raw material price pressure.

There has been an uptrend in raw material prices since December 2020-end.

The company took a price hike of 2.8% effective May 1st.

ASIAN PAINTS



More pricing action will be taken if inflation pressure continues.

Future pricing will be based not only on raw material price pressure, but also

demand situation and competitors.

Management is keen on developing better sourcing efficiencies, leveraging

technology and reducing overheads to protect margins.

Outlook and valuation: Shining bright; maintain ‘BUY’

The domestic paints industry commands strong pricing power, which is evident from

frequent price hikes amid inflationary raw material prices; moreover, price cuts

happen with a lag in a deflationary environment. Industry volume growth has a

strong correlation with GDP growth (1.5–2x). Recovery in GDP in FY22 should give

volumes a boost. Furthermore, innovation and strong repainting demand (90% of

total) are big drivers of growth. Besides, considering the industry’s low penetration

(~50% according to our analysis), growth potential remains huge.

APL has sharpened the focus on other allied segments such as waterproofing. The

entry in adhesives with bigger plans for home décor (Color Ideas, AP Homes) is an

additional growth trigger.

With raw materials being crude-linked and crude being inflationary, we believe, even

if the inflationary pressure returns, APL has pricing power to deal with it.

We expect distribution synergies between the home décor segment and the existing

paint distribution network to spur operating leverage. The GST rate cut has further

triggered a shift from the unorganised towards organised. Capacity expansion of

600,000KL bodes well for revenue growth.

We expect double-digit decorative volumes to sustain riding potential demand shift

from the unorganised segment (~30%). This, coupled with APL’s capability to hike

prices should help maintain margin.

We expect double-digit growth in decorative volumes to sustain, riding the potential

demand shift from unorganised segment (~30%). This coupled with APL’s capability

to hike prices should help maintain margin. Considering the beat on top line, we are

raising the TP to INR3,185 (from INR3,140) and retaining ‘BUY/SO’. The stock is

trading at 54.2x FY23E EPS.

One-year forward P/E

Source: Company

500

1,100

1,700

2,300

2,900

3,500

(IN

R)

65x

40x

45x

55x

70x

50x

60x

75x


ASIAN PAINTS


Standalone sales growth

Source: Company

Domestic decorative segment - Volume growth

Source: Company

Standalone EBITDA margin

Source: Company

-50.0

-30.0

-10.0

10.0

30.0

50.0

Q4

FY1

7

Q1

FY1

8

Q2

FY1

8

Q3

FY1

8

Q4

FY1

8

Q1

FY1

9

Q2

FY1

9

Q3

FY1

9

Q4

FY1

9

Q1

FY2

0

Q2

FY2

0

Q3

FY2

0

Q4

FY2

0

Q1

FY2

1

Q2

FY2

1

Q3

FY2

1

Q4

FY2

1

(%)

-50.0

-30.0

-10.0

10.0

30.0

50.0

Q4

FY1

7

Q1

FY1

8

Q2

FY1

8

Q3

FY1

8

Q4

FY1

8

Q1

FY1

9

Q2

FY1

9

Q3

FY1

9

Q4

FY1

9

Q1

FY2

0

Q2

FY2

0

Q3

FY2

0

Q4

FY2

0

Q1

FY2

1

Q2

FY2

1

Q3

FY2

1

Q4

FY2

1

(%)

0.0

6.0

12.0

18.0

24.0

30.0

Q4

FY

17

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

Q3

FY

20

Q4

FY

20

Q1

FY

21

Q2

FY

21

Q3

FY

21

Q4

FY

21

(%)

ASIAN PAINTS



A snapshot of standalone business

Year to March Q4FY21 Q4FY20 % Change Q3FY21 % Change

Net sales 56,708 38,790 46.2 58,728 (3.4)

COGS 31,356 20,560 52.5 31,628 (0.9)

Gross Profit 25,352 18,230 39.1 27,100 (6.5)

Staff costs 2,992 2,372 26.2 2,809 6.5

Other expenditure 10,136 8,100 25.1 7,749 30.8

Total expenditure 13,128 10,472 25.4 10,558 24.3

EBITDA 12,224 7,758 57.6 16,542 (26.1)

Depreciation 1,929 1,722 12.1 1,690 14.1

EBIT 10,295 6,037 70.5 14,852 (30.7)

Interest 246 193 27.2 168 46.7

Other income 986 651 51.4 1,214 (18.8)

PBT 11,035 6,495 69.9 15,898 (30.6)

Exceptional item 0 332 NA 0 NA

Tax expenses 2,839 1,642 72.9 4,019 (29.4)

Net profit 8,196 4,521 81.3 11,879 (31.0)

As % of net revenues

COGS 55.3 53.0 229 53.9 144

Staff expenses 5.3 6.1 (84) 4.8 49

Others 17.9 20.9 (301) 13.2 468

EBITDA 21.6 20.0 156 28.2 (661)

PAT 14.5 11.7 280 20.2 (577)

Tax rate 25.7 25.3 45 25.3 45

Source: Company


ASIAN PAINTS


Consolidated financial snapshot (INR mn)

Year to March Q4FY21 Q4FY20 % change Q3FY21 % change FY21 FY22E FY23E

Net sales and operating income 66,514 46,356 43.5 67,885 (2.0) 2,17,128 2,55,841 2,86,578

Cost of goods sold 37,793 25,106 50.5 37,285 1.4 1,20,972 1,42,175 1,57,594

Employees' remuneration 4,121 3,356 22.8 3,883 6.2 15,408 17,262 19,385

Other expenditure 11,417 9,298 22.8 8,839 29.2 32,192 38,713 44,068

Total expenditure 53,332 37,760 41.2 50,006 6.7 1,68,572 1,98,150 2,21,048

EBITDA 13,183 8,596 53.4 17,879 (26.3) 48,556 57,691 65,530

Depreciation 2,134 1,945 9.7 1,932 10.4 7,913 8,660 9,160

EBIT 11,049 6,651 66.1 15,947 (30.7) 40,643 49,031 56,370

Interest Expense 299 257 16.4 211 41.3 916 991 931

Other income 754 558 35.1 979 (23.0) 3,031 4,011 4,498

Profit Before Tax 11,505 6,953 65.5 16,715 (31.2) 42,758 52,051 59,938

Provision for Tax 2,864 2,190 NM 4,314 (33.6) 10,976 13,377 15,404

Minority Interest 59 40 47.7 253 (76.8) -286 -580 -668

Reported Profit 8,699 4,803 81.1 12,654 (31.3) 32,068 39,254 45,202

Adjusted Profit 8,699 4,803 81.1 12,654 (31.3) 32,068 39,254 45,202

No. of Shares outstanding (mn) 959 959 959 959 959 959

Adjusted Diluted EPS 9.1 5.0 81.1 13.2 (31.3) 33.4 40.9 47.1

as % of net revenues 0.1 0.1 0.1 0.1 0.1 1.1 1.1 1.1

COGS 56.8 54.2 266 54.9 190 55.7 55.6 55.0

Staff expenses 6.2 7.2 (104) 5.7 48 7.1 6.7 6.8

Others expenditure 17.2 20.1 (289) 13.0 415 14.8 15.1 15.4

EBITDA 19.8 18.5 128 26.3 (652) 22.4 22.5 22.9

EBIT 16.6 14.3 226 23.5 (688) 18.7 19.2 19.7

Adjusted Profit 13.2 10.4 272 19.0 (585) 14.6 15.1 15.5

Tax rate 24.9 31.5 (660) 25.8 (91) 25.7 25.7 25.7

Source: Company, Edelweiss Research

ASIAN PAINTS



Company Description

APL is the largest paints company in India and figures among the top 10 players in

the world. The decorative segment accounts for almost 80% of the overall paints

market. Paints sales in domestic and international markets contributed 81% and

13%, respectively, to the company’s consolidated revenue; chemical sales

accounted for the balance. Among APL's international businesses, Asia contributes

the lion’s share at 49% to revenue, Africa and Middle East contributes 21% and 24%

respectively.

Investment Theme

The paints industry is expected to post robust volume growth led by strong

repainting demand and from construction. Growth in the repainting segment,

accounting for about ~75% of decorative demand, is on account of good demand in

rural and small towns. Further, anticipated growth in construction activity over the

next five years creates opportunity for fresh painting. APL is expected to grow ahead

of the market on account of its pricing strategy at the lower end, higher growth in

premium products, brand equity and distribution strength. However, moderation in

real estate and auto segments can act as barrier.

Key Risks

A slowdown in the economy is the biggest risk for the paints industry, as about 75%

of demand for decorative paints arises from repainting, which, in turn, depends

heavily on the country’s economic condition.

A rise in crude oil price and INR depreciation could hurt APL's margin as crude

derivatives account for majority of APL's input costs


ASIAN PAINTS


Additional Data Management

MD and CEO Mr. Amit Syngle

CFO Mr. R J Jeyamurugan

Non-Exe Director Mr. Abhay Vakil

Non Ex Chairman Mr. Ashwin Dani

Auditor Deloitte Haskin & Sells

Holdings – Top 10* % Holding % Holding

Teesta Retail 4.90 Axis AMC 0.77

LIC 2.92 Icici Pru AMC 0.68

Sbi Funds 1.28 Jpmorgan Chase 0.64

Blackrock 1.27 Motilal Oswal A 0.37

Vanguard 1.12 Uti AMC 0.37

*Latest public data

Recent Company Research Date Title Price Reco

22-Feb-21 Correction overdone; Company Update

2,387 Buy

17-Feb-21 Shining bright; Company Update 2,450 Buy

21-Jan-21 Festive push cheers up volumes; Result Update

2,716 Buy

Recent Sector Research Date Name of Co./Sector Title

26-Apr-21 Consumer discretionary

Regulations: Nipping the butt in the bud; Sector Update

15-Mar-21 United Spirits Gradual recovery underway; Company Update

05-Mar-21 Pidilite Robust recovery; margin pressure ahead; Company Update

Rating Interpretation

Source: Bloomberg, Edelweiss research

Daily Volume

Source: Bloomberg

Rating Distribution: Edelweiss Research Coverage

Buy Hold Reduce Total

Rating Distribution* 166 57 20 244

>50bn >10bn and <50bn <10bn Total

Market Cap (INR) 196 54 3 253

*1 stocks under review

Rating Rationale

Rating Expected absolute returns over 12 months

Buy: >15%

Hold: >15% and <-5%

Reduce: <-5%

TP1,562

TP2,075

TP3,140

1125

1530

1935

2340

2745

3150

May-18 Nov-18 May-19 Nov-19 May-20 Nov-20

(IN

R)

APNT IN Equity Buy Hold Reduce0

4

8

12

16

20

May-18 Nov-18 May-19 Nov-19 May-20 Nov-20

(Mn

)

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key data revenue robust; cost inflationary

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