Asian Paints

The stock price tanked yesterday post the Q4FY15 performance. The numbers were dull, not as vibrant as expected. The company posted a consolidated net profit of Rs.341 crore, up 19% (YoY) on a 7% rise in net sales at Rs.3490 crore. EBITDA came in at Rs.559 crore, up 15% while margins improved from 14.66% to 15.81%. Lower crude prices helped bring down the raw material cost by 7%. Tax outgo during the quarter rose 27%. 98% of the company’s income comes from paints and the balance is the new line of Home improvement which is kitchen and bath fittings. Both have been through acquisitions and it continues to drag the bottomline down with its losses. The company ended FY15 with a consolidated net profit of Rs.1395 crore, up 14%.

The company was a victim of poor demand due to weak consumer sentiments, both in the decorative as well as automobile segment. Though industrial paint segment did well in Q4, the outlook is challenging looking ahead due to sluggish industrial growth. Egypt market continues to remain tough though other exports have done well in Q4. The stock has a rich valuation despite the disappointment; EPS for FY15 was at Rs.14.54 (Re.1 FV) and this discounts the current price by over 52 times.