Friday, July 31, 2015

Asian Paints - Annual Report Analysis - Part 3

Income Statement Analysis (standalone)

Particular
FY15
FY14
FY13
FY12
FY11
Sales
11,486
10,300
8,910
7,964
6,336
Raw material
6,440
5,940
5,163
4,728
3,647
Gross Margin
5,046
4,360
3,747
3,236
2,689
Operating Exps
2,592
2,219
1,845
1,543
1,232
Personnel Cost
607
482
405
342
300
EBITDA
1,847
1,659
1,497
1,352
1,157
Depreciation
223
212
127
99
94
EBIT
1,624
1,446
1,370
1,252
1,063
Financial Cost
27
26
31
31
15
Other Income
336
282
176
141
75
PBT
1,934
1,703
1,516
1,363
1,122
Tax
606
534
466
405
347
PAT
1,327
1,169
1,050
958
775

Profitability Ratio
Profitability Ratio
FY15
FY14
FY13
FY12
FY11
Gross Margin
43.9%
42.3%
42.0%
40.6%
42.4%
EBITDA Margin
16.1%
16.1%
16.8%
17.0%
18.3%
Net Profit Margin
11.6%
11.3%
11.8%
12.0%
12.2%






Effective Tax Rate
31.3%
31.3%
30.7%
29.7%
30.9%

Growth Ratio
Growth Ratio (YOY)
FY15
FY14
FY13
FY12
5 Year CAGR
Sales Growth
11.5%
15.6%
11.9%
25.7%
12.6%
Employee Cost
25.8%
19.2%
18.4%
13.7%
15.1%
  • The company has registered FY15 yoy revenue growth of 11.5%, which is slightly lower than 5 year compound average growth rate (CAGR) of 12.6%. Lower sales growth in FY15 is attributable to subdued demand of paints on account of inflation. 
  • EBITDA margin has remained constant at 16.1% in FY15, inspite of increase in personnel cost to 5.3% of revenue from 4.7% in FY14. 
  • It has maintained gross margin of over 40.0% during FY11- FY15 and average 5 year net profit over 11.5%. 
  • Advertisement and cash discount expenses stood at 10% of revenue (FY14: 9.6%) 
  • During FY15, personnel cost includes actuarial loss of Rs.13.73 crores(FY14: gain of Rs.5.79 crores) on account of significant reduction in discount rates 
  • Effective tax rate has remained constant at 31.3% for FY15 and FY14.

Cash Flow Analysis
Cash Flow Ratios
FY15
FY14
FY13
FY12
FY11
CFO/ Sales
10.0%
13.3%
12.1%
9.5%
11.7%
Free Cash Flow to CFO
0.71
0.88
0.46
0.19
0.81
CFO / Total Asset
0.16
0.20
0.19
0.15
0.19
CFO / Current Liabilities
0.41
0.48
0.46
0.35
0.44
Cash from Financing / CFO
(0.64)
(0.41)
(0.55)
(0.39)
(0.43)

  • Asian Paints is cash rich. Average CFO/ sales has been 11.3% over FY11-FY15. This indicates Asian Paints has been consistent in converting its sales to cash flow. The ratio has improved over FY12- FY14, with slight dip in FY15. 
  • Cash flow from operation to total asset has slightly fallen in FY15. Company is effectively utilizing its asset to generate cash. Also, its cash flow are sufficient to meet its current liabilities. 
  • Negative Cash flow from financing / cash flow from operation over FY11- FY15 indicates that company is not dependent on external funds to meet its cash requirement from operations. Major financing activity is dividend payment to shareholders. 
Contingent Liability Analysis

Particular
FY15
FY14
FY13
FY12
FY11
Contingent Liability and Commitments
598
447
462
785
487
Net Worth
4,230
3,600
3,022
2,598
1,979
Contingent Liability as % of Net Worth
14.1%
12.4%
15.3%
30.2%
24.6%
  • Disputed tax liability has increased from Rs. 78.8 crs in FY14 to Rs. 98.4 crs in FY15 
  • Contracts to be executed on capital account has increased in FY15, to meet its Capex requirements



Overall, Asian Paints has good and experienced management. Systematic and consistent financial performance indicates strong financial position to take on challenges. It has good corporate governance practices. Stock price has depicted consistent positive growth over past decades.


Source for Annual Report Analysis - Part 1,2 and 3

  • Annual Report FY 11 to FY15
  • Asian Paints website, press release
  • Edelwise Brave Heart series - Asian Paints - Mar 2014