Asian Paints continues to attract investor interest

Asian Paints, one of the largest paint-makers in the country, continues to draw investor interest. This
is because of softening crude prices and strong sales in the economy products category in the last one year. Also, strong volumes despite slowing consumption, good pricing power aiding margins, and market share gains, are key positives boosting the company’s growth.

In the recent September quarter, the company registered revenue growth of 9.4 per cent to Rs 5,051 crore with high double-digit volume growth. The company’s profit grew 67 per cent in the September quarter aided by deferred tax reversal of about Rs 150 crore. Since the company has exercised the option to adopt the new corporate tax rate of 25.17 per cent (inclusive of surcharge and cess), there has been a significant jump in the net profit.

Despite the slowdown in the economy, led by fall in consumption and tight liquidity conditions, Asian Paints has delivered strong double-digit volume growth driven by the decorative paints segment. The company derives over 75 per cent of its revenue from decorative paints and the remaining from the industrial segment. The aggressive sales push efforts taken by Asian Paints at the dealer level, along with higher sales from the lower-end products such as putty, distemper and economy paints, boosted the volumes in the decorative paints segment. The stable demand in year. For the September quarter this year, raw material costs (as a percentage of sales) stood at 55 per cent, 100 basis points lower than in the same period last year. While crude prices had been volatile in the recent months, it is still at around $58 per barrel, lower than in the same period previous year ($79 per barrel).

The company was able to push stocks to dealers at better rates and improve margins. Its operating margin improved to 19 per cent in the September quarter, up from 18 per cent in the same quarter last year.