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The numbers tell that Asian Paints is a solid growth stock

21-05-2014 • About Asian Paints ($ASIANPAINT) • By InTwits

Asian Paints is a fast-growing stock in Furniture-Furnishing-Paints industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Asian Paints showed fast growth in the last financial year. The company's revenue surged on 15.7% in FY2014. Together with revenue growth Asian Paints also managed to keep EBITDA growth. EBITDA grew 16.1% for the same period.

In the longer period the company showed fast revenue growth of 17.8% from FY2011 to FY2014 annually. EBITDA surged on 14.9% from FY2011 to FY2014 annually.

Asian Paints ($ASIANPAINT) financials for the last 5 years

mln. INR FY2010 FY2011 FY2012 FY2013 FY2014
Revenue growth, %-62.1%24.8%13.3%15.7%
SG&A, %
EBITDA growth, %8.2%15.8%13.0%16.1%
EBITDA margin, %6.05%17.3%16.0%16.0%16.0%
Net Income8,3568,4329,88711,13912,188
Net Income margin, % 4.12%11.0%10.3%10.2%9.69%
CAPEX/Revenue, %1.95%2.03%5.69%5.92%2.00%
Net Debt/EBITDA0.1x0.1x0.1x-0.0x0.0x
ROIC, %59.7%50.4%47.1%43.0%39.8%
ROE, %57.4%43.3%40.1%36.3%32.8%

Profitability and return on investment

EBITDA margin hasn't changed. It stayed at 16% in FY2014. In the last 3 years EBITDA margin decreased on 1.30 pp from 17.3% in FY2011 to 16% in FY2014.

Asian Paints shows attractive ROIC at 39.8% for the last 12 months which assumes stable development model. Three years ago it was considerably higher at 50.4%. It's average ROIC for the last three years was 43.3%.

The company showed small Net Income margin decline of 0.500 pp from 10.2% to 9.70% in FY2014. In the longer period Asian Paints's Net Income margin dropped on 1.30 pp from 11% in FY2011 to 9.70% in FY2014.

Asian Paints operates at ROE of 32.8%. Average ROE for the last three years was 36.4%.

Capital expenditures (CAPEX)

In FY2014 Asian Paints had CAPEX/Revenue of 2.00%. The company's CAPEX/Revenue decreased slightly on 0.0346 pp from 2.03% in FY2011 to 2.00% in FY2014. For the last three years the average CAPEX/Revenue was 4.54%.

Leverage (Debt)

Asian Paints has low debt level at 0.0x Net Debt/EBITDA - at the same time with high growth. In the last 3 years Asian Paints showed big decline in leverage of 0.06x from 0.07x in FY2011 to 0.01x in FY2014.

Valuation vs. comparable companies

The market closed today at 26.0x EV/EBITDA for Asian Paints which is 62.4% higher than 16.0x Furniture-Furnishing-Paints peer group avearge calculated on the basis of 41 companies. The company trades at 43.0x P/E which is not surprisingly 61% higher than 26.7x Furniture-Furnishing-Paints industry avearge calculated based on 2 companies.

Management team

K B S Anand is a CEO of Asian Paints.

Peers in Furniture-Furnishing-Paints

Below we provide Asian Paints benchmarking against other companies in Furniture-Furnishing-Paints industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

 FY2010 FY2011 FY2012 FY2013 FY2014
Kajaria Ceramics ($KAJARIACER)-64.3%37.7%22.8%13.9%
Median (1 company)-64.3%37.7%22.8%13.9%
Asian Paints ($ASIANPAINT)-62.1%24.8%13.3%15.7%

Top companies by EBITDA margin, %

 FY2010 FY2011 FY2012 FY2013 FY2014
Kajaria Ceramics ($KAJARIACER)15.8%15.8%15.3%15.6%
Median (1 company)15.8%15.8%15.3%15.6%
Asian Paints ($ASIANPAINT)6.0%17.3%16.0%16.0%16.0%

Top companies by CAPEX/Revenue, %

 FY2010 FY2011 FY2012 FY2013 FY2014
Kajaria Ceramics ($KAJARIACER)17.5%5.7%9.6%8.5%
Median (1 company)17.5%5.7%9.6%8.5%
Asian Paints ($ASIANPAINT)1.9%2.0%5.7%5.9%2.0%

Top companies by ROIC, %

 FY2010 FY2011 FY2012 FY2013 FY2014
Kajaria Ceramics ($KAJARIACER)27.9%28.6%28.8%
Median (1 company)27.9%28.6%28.8%
Asian Paints ($ASIANPAINT)59.7%50.4%47.1%43.0%39.8%

Top companies by Net Debt / EBITDA

 FY2010 FY2011 FY2012 FY2013 FY2014
Kajaria Ceramics ($KAJARIACER)1.9x1.3x1.3x0.8x
Median (1 company)1.9x1.3x1.3x0.8x
Asian Paints ($ASIANPAINT)0.1x0.1x0.1x-0.0x0.0x