Asian Paints CAPEX jumped on 81.7% and Revenue increased on 9.5%

11-05-2016 • About Asian Paints ($ASIANPAINT) • By InTwits

Asian Paints reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

• Asian Paints is a growth stock: FY2016 revenue growth was 9.5%, 5 year revenue CAGR was 14.8% at FY2016 ROIC 40.7%
• Asian Paints has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.4%. At the same time it's in pair with industry average of 11.4%
• CAPEX is quite volatile: ₹8,244m in FY2016, ₹4,538m in FY2015, ₹2,510m in FY2014, ₹6,438m in FY2013, ₹5,464m in FY2012
• The company has highly profitable business model: ROIC is 40.7%

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue increased on 9.5%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 6.1 pp from 20.4% to 26.5% in FY2016.

Net Income margin increased slightly on 1.3 pp from 10.0% to 11.3% in FY2016. During FY2012-FY2016 Net Income margin bottomed in FY2014 at 9.7% and was growing since that time.

Investments (CAPEX, working capital and M&A)

Asian Paints's CAPEX/Revenue was 5.4% in FY2016. CAPEX/Revenue decreased slightly on 0.54 pp from 5.9% in FY2013 to 5.4% in FY2016. Average CAPEX/Revenue for the last three years was 3.5%.

Return on investment

The company operates at high and attractive ROIC (40.7%) and ROE (33.4%). ROIC increased on 3.6 pp from 37.1% to 40.7% in FY2016. ROE increased slightly on 1.6 pp from 31.8% to 33.4% in FY2016. During the last 5 years ROIC bottomed in FY2015 at 37.1%. During FY2012-FY2016 ROE bottomed in FY2015 at 31.8%.

Leverage (Debt)

Debt level is -0.0x Net Debt / EBITDA and 0.1x Debt / EBITDA. Debt dropped on 22.1% while cash surged on 106%.

Asian Paints has no short term refinancing risk: cash is higher than short term debt (167.7%).

Valuation and dividends

Asian Paints's trades at EV/EBITDA 31.0x and P/E 50.4x while industy averages are 17.8x and 21.9x. Asian Paints's EV/(EBITDA-CAPEX) is 43.8x with the industry average at 22.8x.

Management team

Asian Paints's CEO K B S Anand has spent 8 years with the company.

Financial and operational results

Asian Paints ($ASIANPAINT) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	95,983	108,744	125,816	140,053	153,307	9.5%
EBITDA	15,384	17,379	20,170	22,378	28,086	25.5%
Net Income	9,887	11,139	12,188	13,952	17,262	23.7%
Balance Sheet
Cash	2,283	2,535	2,290	2,044	4,204	105.7%
Short Term Debt	2,858	2,037	2,078	3,399	2,507	-26.3%
Long Term Debt	553	473	414	783	749	-4.3%
Cash flow
Capex	5,464	6,438	2,510	4,538	8,244	81.7%
Ratios
Revenue growth	24.8%	13.3%	15.7%	11.3%	9.5%
EBITDA growth	15.8%	13.0%	16.1%	10.9%	25.5%
EBITDA Margin	16.0%	16.0%	16.0%	16.0%	18.3%	2.3%
Net Income Margin	10.3%	10.2%	9.7%	10.0%	11.3%	1.3%
CAPEX, % of revenue	5.7%	5.9%	2.0%	3.2%	5.4%	2.1%
ROIC	47.1%	43.0%	39.8%	37.1%	40.7%	3.6%
ROE	40.1%	36.3%	32.8%	31.8%	33.4%	1.6%
Net Debt/EBITDA	0.1x	-0.0x	0.0x	0.1x	-0.0x	-0.1x

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, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Kajaria Ceramics ($KAJARIACER)	-	22.8%	13.9%	19.1%	10.6%
Nitco ($NITCO)	31.0%	-8.1%	0.1%	7.7%	-
Murudeshwar Ceramics ($MURUDCERA)	3.6%	-19.5%	1.3%	-5.5%	-
Shalimar Paints ($SHALPAINTS)	19.5%	2.5%	-3.2%	-10.3%	-
Hanung Toys & Textiles ($HANUNG)	24.6%	27.6%	-73.8%	-71.2%	-
Median (5 companies)	22.0%	2.5%	0.1%	-5.5%	10.6%
Asian Paints ($ASIANPAINT)	-	13.3%	15.7%	11.3%	9.5%

Top companies by EBITDA margin, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Murudeshwar Ceramics ($MURUDCERA)	23.6%	21.8%	21.6%	23.5%	-
Kajaria Ceramics ($KAJARIACER)	15.8%	15.3%	15.6%	16.3%	19.4%
Neycer India ($NEYCERI)	-	-	-	9.3%	-
Bil Continental ($BILCONTI)	-	-	-	2.9%	-
Shalimar Paints ($SHALPAINTS)	7.8%	7.6%	3.0%	2.1%	-
Median (6 companies)	15.8%	15.3%	9.3%	6.1%	19.4%
Asian Paints ($ASIANPAINT)	16.0%	16.0%	16.0%	16.0%	18.3%

Top companies by CAPEX/Revenue, %

Top	FY2012	FY2013	FY2014	FY2015	FY2016
Kajaria Ceramics ($KAJARIACER)	5.7%	9.6%	8.5%	12.3%	11.3%
Shalimar Paints ($SHALPAINTS)	0.7%	2.1%	2.8%	6.5%	-
Median (2 companies)	5.7%	7.6%	5.7%	9.4%	11.3%
Asian Paints ($ASIANPAINT)	5.7%	5.9%	2.0%	3.2%	5.4%

Top companies by ROIC, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Kajaria Ceramics ($KAJARIACER)	27.9%	28.6%	28.8%	29.8%	31.3%
Shalimar Paints ($SHALPAINTS)	25.9%	22.2%	6.2%	2.4%	-
Euro Ceramics ($EUROCERA)	-8.1%	-11.2%	-	-	-
Neycer India ($NEYCERI)	-	-6.5%	-	-	-
Bil Continental ($BILCONTI)	-	4.4%	-	-	-
Median (10 companies)	10.7%	4.7%	6.2%	16.1%	31.3%
Asian Paints ($ASIANPAINT)	47.1%	43.0%	39.8%	37.1%	40.7%

Top companies by Net Debt / EBITDA

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Shalimar Paints ($SHALPAINTS)	1.5x	1.9x	7.3x	13.7x	-
Kajaria Ceramics ($KAJARIACER)	1.3x	1.3x	0.8x	0.7x	0.6x
Neycer India ($NEYCERI)	11.8x	107.4x	-	0.0x	-
Murudeshwar Ceramics ($MURUDCERA)	3.2x	4.1x	0.0x	0.0x	-
Bil Continental ($BILCONTI)	7.9x	7.0x	0.0x	0.0x	-
Median (5 companies)	6.2x	4.3x	0.4x	0.0x	0.6x
Asian Paints ($ASIANPAINT)	0.1x	-0.0x	0.0x	0.1x	-0.0x

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