Asian Paints Ltd - Research Report

Private Client Research






Asian Paints Ltd


March 25, 2020

Sensex: 28535.78

CNX Nifty: 8317.85


BSE: 500820

Reco Price
Rs. 1535
Price Target (1 Year)
Rs. 2210


March 25, 2020



CNX Nifty








Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
1916.70 - 1291.25
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Asian Paints Ltd Sensex
Asian Paints Ltd
Return (%)


(in %)

+91 22 6639 3000


Over the course of 75+ years, Asian Paints became a corporate force and India's leading paints company and has come a long way since its small beginning in 1942. The company has been the market leader in paints since 1967, driven by its strong consumer-focus and innovative spirit. It is India’s leading paint company and the group has an enviable reputation in the corporate world for professionalism, fast track growth, and building shareholder equity. Asian Paints has manufacturing plants in 16 countries and has 27 paint manufacturing facilities in the world servicing consumers in over 65+ countries. Besides Asian Paints, the group operates around the world through its subsidiaries Asian Paints Berger, Apco Coatings, SCIB Paints, Taubmans, Causeway paints and Kadisco Asian paints.

PPG Asian Paints: The company operates through ‘PPG Asian Paints Pvt Ltd’ (50% stake between Asian Paints and PPG Inc, USA, one of the largest automotive coatings manufacturers in the world) to service the growing requirements of the Indian automotive coatings market.

Asian Paints PPG: It has 50% stake in ‘Asian Paints PPG Pvt Ltd’ and provides products like protective, industrial powder, industrial containers and light industrial coatings markets in India. The protective coatings range includes products for application on various metallic surfaces such as mild steel, stainless steel, aluminium, galvanized steel as well as masonry / RCC substrates. The company has experience across a wide range of industries. The markets served include nuclear, thermal and hydel power plants, refineries, offshore and onshore oil & gas structures, chemical, petrochemical and fertilizer plants, sugar and pulp & paper industries, etc. The company offers products under global brands such as ASIAN PAINTS, SIGMA & AMERCOAT.

Business Segments

Decorative paints: Asian Paints is present in all the four segments i.e. interior wall finishes, exterior wall finishes, enamels and wood finishes. It also offers water proofing, wall coverings and adhesives in its product portfolio. This segment is the largest contributor to their group revenues and has a network of 65,000+ dealers which enables the company to cater to a wide cross-section of customers across geographies.

Industrial paints: Asian Paints is present in the industrial coatings space with high-performance, high-quality offerings that serve to protect surfaces through their two 50:50 Joint Ventures with PPG Industries Inc., USA.

Home improvement and décor category: The Company is present in the Kitchen and Bath fittings space and offers various products under Sleek and Ess Ess brand.

The company is a leading paint company for actively empowering customers to create their dream homes.

Rationale for Investment

Strong established brand:
Asian Paints has earned the trust of consumers to become a name that is known and loved by billions. The company brands are leaders in the markets they operate in, and it has invested on advertising over the past few decades to build very strong brand equity. Even though the underlying product is a commodity chemical product, creative advertising has built strong brands and created a strong emotional connect with consumers. It is difficult for a new player to match the brand equity of Asian Paints with its long-established brand portfolio. Further, the company has decade long engagements with paint contractors and architects who are either decision makers or influencers in product purchase.

Market leader in the domestic paints industry:
The company enjoys a dominant share of 51% in the organised domestic paints market (the second-largest player has a market share of a modest 16%). In the decorative paints segment, which comprises about 70-75% of the Indian paints industry, the company has 58% market share. It also has a healthy position in the automotive industrial coatings segment with a market share of about 20%. Stronger logistics and brands become invaluable for paint companies; this helps the company to pass on a rise in costs to customers.

Extensive distribution reach:
The company’s wide distribution network, across India and globally, conveys relationships nurtured over decades with solid value-addition, centred on providing an exceptional customer experience at every touch point. The distribution channel of the paints industry is different from that of the FMCG industry. Paint companies are directly connected with dealers (retail outlets) whereas in the FMCG industry, companies are connected with retail outlets through distributors/wholesalers. Asian Paints supplies its products to dealers through depots located across the country. It has more than 140 depots that supply products to a large part of its 65,000+ dealer network more than twice a day. Its dealer additions per year are approximately 5,000 to 7,000 dealers. It takes years for any player to build a pan-India supply chain.

Waterproofing and home improvement will become their new growth drivers:
The company has continuously invested in new categories over the past few years such as waterproofing and it has made good progress and emerged as the #2 player in this nascent and promising segment. The company is eyeing leadership in waterproofing in the medium-term and its distribution synergies with paints will act as the key to success. The company has expanded its product portfolio in the home improvement segment with sleek kitchen solutions and Ess Ess bath fittings. The company has also expanded its product portfolio in the adhesives segment with new products like Trugrip max. Further, the company’s investments in other segments enable them to diversify revenue from different business segments.

Diversified product range:
The company has a wide range of innovative and industry-first options, driven by consumer-centricity as well as high standards of quality and safety. In FY19, it launched 23 new products in the architectural paints segment and 15 in the Industrial paints segment. Some of the new products are:

Royale Health Shield: It is developed to address the safety and health issues of consumers and conforms to the stringent anti-asthma requirements of American Asthma Foundation (AAF).

PU Magnum: This product offers 15 years waterproofing warranty for terraces developed and commercialised.

Protek Lamino: It is an anti-graffiti self-cleaning exterior paint developed and launched with 15 years’ warranty.

Nilaya Natural: It is developed with 95% natural content with unique tinting system using powder tinter.

Consistent quest for innovation:
Innovation has been one of the key cornerstones of Asian Paints over its long existence. The company remains an agile and responsive world-class innovation led organisation that is constantly adapting to evolving customer aspirations and catalysing its growth possibilities across existing and future businesses. The company has been constantly undertaking research of colour and its myriad influences on lifestyle in India. Colour Next is a celebration of colours born out of research and imagination, an outcome of a comprehensive trend mapping exercise conducted by Asian Paints across India with inputs from design professionals, sociologists, and industry experts.



The size of the domestic paints industry is estimated to be Rs 50,000 crores with the decorative paint category constituting almost 75% of this market. The decorative paint market includes multiple categories depending on the nature of the surface like exterior wall paints, interior wall paints, wood finishes, enamels as well as ancillary products like primers, putties, etc. The industrial paints category constitutes the balance 25% of the paint market and includes a broad array of segments like automotive coatings, marine coatings, packaging coatings, powder coatings, protective coatings and other general industrial coatings. Unorganized players still constitute about 30-35% of the domestic paints industry and primarily cater to the low end of the product basket. The paints industry continues to see the emergence of small-to-medium level new paint players that continue to put pressure at the low-end emulsions.

The organized decorative paints industry in India is oligopolistic in nature with the top four players commanding 85%+ market share. Even as the industry deploys simple technology and has modest capital requirements, distribution-led entry barriers have made it difficult for new entrants to scale up organically. Further, all of the top four companies have completed 75-100 years of existence as against 13-20 years for fifth and sixth player (Nippon Paint India and Indigo Paints) to achieve 2-4% market share. The paints industry is a major beneficiary of the rapid urbanisation, changes in lifestyle and growing income in India. The sector is closely linked to the overall economy, growing at 1.5 to 2 times the expansion in GDP (gross domestic product). The annual revenue of the paints industry is expected to gather momentum as the government steps up spending on infrastructure, particularly housing, and promotes manufacturing.

Profit & Loss Statement:- (Consolidated)

(Rs Crores)

DESCRIPTION Mar-17 Mar-18 Mar-19 Mar-20E Mar-21E Mar-22E
Net Sales 15396.56 16887.19 19349.84 21110.00 23643.20 26480.40
Growth% 10.00% 15.00% 9.00% 12.00% 12.00%
Raw material consumed 7136.21 8399.81 9849.81 10450.00 11709.00 13205.00
Other Manufacturing Expenses 1662.75 1691.68 1900.93 1582.00 1975.00 2198.00
COGS 8798.96 10091.49 11750.74 12032.00 13684.00 15403.00
Gross Profit 6597.60 6795.70 7599.10 9078.00 9959.20 11077.38
Employee Cost 1033.62 1115.48 1270.02 1512.00 1655.02 1853.63
Other Expenses 2539.67 2473.09 2799.24 3198.20 3401.00 3707.30
EBITDA 3024.31 3207.13 3529.84 4367.80 4903.18 5516.50
Depreciation 334.79 360.47 430.67 790.00 765.60 750.00
EBIT 2689.52 2846.66 3099.17 3577.80 4137.58 4766.50
Other Income 262.43 288.09 227.05 362.00 298.00 275.00
Interest 37.33 41.47 56.31 110.00 80.00 60.00
Profit Before Tax 2914.62 3093.28 3269.91 3829.80 4355.58 4981.50
Provision for Tax 947.98 1041.55 1098.82 957.45 1088.89 1245.38
Tax rate 32.50% 33.70% 33.60% 25.00% 25.00% 25.00%
Profit After Tax 1966.64 2051.73 2171.09 2872.35 3266.68 3736.13
Pat margins% 12.80% 12.10% 11.20% 13.60% 13.80% 14.10%
Adjusted EPS 20.22 21.26 22.51 29.95 34.06 38.95
Source: Stockaxis Research, Company Data


The company dictates pricing in the industry, and this is noticeable from the fact that the company initiates frequent price hikes amidst inflationary raw material prices. We expect the company will put in lot of efforts on other allied segments such as waterproofing and adhesives and has bigger plans for home décor (Color Ideas, Asian Paints Homes) which will act as an additional growth trigger. Further, we expect distribution synergies between the home décor segment and the existing paint distribution network to boost operating leverage. The stock is currently trading at 47.1x FY22E EPS.