Parameters Details

Company Asian Paints

Industry Paints
Business (As you understand it, in simple words) XYZ
Current Stock Price (Rs) 4,665
Face Value (Rs) 10
No. of Shares (Crore) 10
Market Capitalization (Rs Crore) 44,747
Promoter Shareholding (Latest Quarter) 52.8%
Promoter Pledged Shareholding (Latest Quarter) 17.7%
Parameters Details
Sales Growth (10-Year CAGR) 20.4%
Gross Profit Growth (10-Year CAGR) 18.1%
Net Profit Growth (10-Year CAGR) 24.4%
Average Debt/Equity (x) 0.3
Average Return on Equity 35.4%
Note: Asian Paints' analysis in this excel is for representation purpose only.
Basic Company Details
Key Financials (Last 10-Years)
(Enter values only in red cells)
Warning!
Excel can be a wonderful tool to analyze the past. But it can be a weapon of
mass destruction to predict the future! So be very careful of what you are
getting into. Here, garbage in will always equal garbage out.
Remember!
Focus on decisions, not outcomes. Look for disconfirming evidence. Calculate.
Pray!
Please! It's your
money. Please don't blame me if results of this excel cause you to lose it all! I've
designed this excel to aid your own thinking, but you alone are responsible for
your actions. I want to live peacefully ever after! :-) I am not a
sadist who wants you to do the hard work by analyzing companies on your own.
But I'd rather give you a compass instead of a map, for you can confuse map
with territory and lose it all! All the best!
Warning!
Excel can be a wonderful tool to analyze the past. But it can be a weapon of
mass destruction to predict the future! So be very careful of what you are
getting into. Here, garbage in will always equal garbage out.
Remember!
Focus on decisions, not outcomes. Look for disconfirming evidence. Calculate.
Pray!
Please! It's your
money. Please don't blame me if results of this excel cause you to lose it all! I've
designed this excel to aid your own thinking, but you alone are responsible for
your actions. I want to live peacefully ever after! :-) I am not a
sadist who wants you to do the hard work by analyzing companies on your own.
But I'd rather give you a compass instead of a map, for you can confuse map
with territory and lose it all! All the best!
Parameter
Consumer monopoly or commodity?
Understand how business works
Is the company conservatively financed?
Are earnings strong and do they show an upward trend?
Does the company stick with what it knows?
Has the company been buying back its shares?
Have retained earnings been invested well?
Is the companys return on equity above average?
Is the company free to adjust prices to inflation?
Buffett Checklist - Read, Remember, Follow!
Source - Buffettology by Mary Buffett & David Clark
Does the company need to constantly reinvest in capital?
Conclusion
Never Forget
Explanation
Seek out companies that have no or less competition, either due to a patent or brand name or
similar intangible that makes the product unique. Such companies will typically have high gross
and operating profit margins because of their unique niche. However, don't just go on margins as
high margins may simply highlight companies within industries with traditionally high margins.
Thus, look for companies with gross, operating and net profit margins above industry norms. Also
Try to invest in industries where you possess some specialized knowledge (where you work) or
can more effectively judge a company, its industry, and its competitive environment (simple
products you consume). While it is difficult to construct a quantitative filter, you should be able to
identify areas of interest. You should "only" consider analyzing those companies that operate in
areas that you can clearly grasp - your circle of competence. Of course you can increase the size
of the circle, but only over time by learning about new industries. More important than the size of
Seeks out companies with conservative financing, which equates to a simple, safe balance sheet.
Such companies tend to have strong cash flows, with little need for long-term debt. Look for low
debt to equity or low debt-burden ratios. Also seek companies that have history of consistently
Rising earnings serve as a good catalyst for stock prices. So seek companies with strong,
consistent, and expanding earnings (profits). Seek companies with 5/10 year earnings per share
growth greater than 25% (alongwith safe balance sheets). To help indicate that earnings growth is
still strong, look for companies where the last 3-years earnings growth rate is higher than the last
10-years growth rate. More important than the rate of growth is the consistency in such growth.
So exclude companies with volatile earnings growth in the past, even if the "average" growth has
Like you should stock to your circle of competence, a company should invest its capital only in
those businesses within its circle of competence. This is a difficult factor to screen for on a
quantitative level. Before investing in a company, look at the companys past pattern of
acquisitions and new directions. They should fit within the primary range of operations for the firm.
Buffett prefers that firms reinvest their earnings within the company, provided that profitable
opportunities exist. When companies have excess cash flow, Buffett favours shareholder-
enhancing maneuvers such as share buybacks. While we do not screen for this factor, a follow-up
examination of a company would reveal if it has a share buyback plan in place.
Seek companies where earnings have risen as retained earnings (earnings after paying
dividends) have been employed profitably. A great way to screen for such companies is by looking
at those that have had consistent earnings and strong return on equity in the past.
Consider it a positive sign when a company is able to earn above-average (better than
competitors) returns on equity without employing much debt. Average return on equity for Indian
companies over the last 10 years is approximately 16%. Thus, seek companies that earn atleast
That's what is called "pricing power". Companies with moat (as seen from other screening metrics
as suggested above (like high ROE, high grow margins, low debt etc.) are able to adjust prices to
inflation without the risk of losing significant volume sales.
Buffett Checklist - Read, Remember, Follow!
Source - Buffettology by Mary Buffett & David Clark
Companies that consistently need capital to grow their sales and profits are like bank savings
account, and thus bad for an investor's long term portfolio. Seek companies that don't need high
capital investments consistently. Retained earnings must first go toward maintaining current
operations at competitive levels, so the lower the amount needed to maintain current operations,
the better. Here, more than just an absolute assessment, a comparison against competitors will
Sensible investing is always about using folly and discipline - the discipline to identify excellent
businesses, and wait for the folly of the market to drive down the value of these businesses to
attractive levels. You will have little trouble understanding this philosophy. However, its successful
implementation is dependent upon your dedication to learn and follow the principles, and apply
Focus on decisions, not outcomes. Look for disconfirming evidence. Pray!
Year / Rs Crore L-9 L-8 L-7 L-6
SOURCES OF FUNDS / EQUITY & LIABILITIES
Share Capital 64 96 96 96
Reserves & Surplus 413 434 471 550
Shareholder's Funds / Equity 478 529 567 646
Minority Interest 75 70 64 60
Non-Current Liabilities
Long-Term Borrowings 197 160 240 261
Current Liabilities 514 581 618 705
Short-Term Borrowings - 9 - -
Trade Payables 232 272 295 330
Other Current Liabilities 177 163 206 249
Short-Term Provisions 105 136 117 126
APPLICATION OF FUNDS / ASSETS
Non-Current Assets 35 34 37 41
Tangible Assets 20 22 24 27
Intangible Assets 5 6 6 7
Capital Work-in-Progress 5 1 1 1
Non-Current Investments 5 6 6 7
Current Assets 737 772 950 1,120
Current Investments - 12 27 75
Inventories 322 318 455 489
Trade Receivables 256 265 296 348
Cash and Bank Balance 68 70 61 73
Short-Term Loans and Advances 55 76 80 74
Other Current Assets 35 31 32 61
Asian Paints - Balance Sheet
(Enter values only in red cells)
L-5 L-4 L-3 L-2 L-1 L
96 96 96 96 96 96
682 886 1,107 1,614 2,092 2,653
778 982 1,203 1,710 2,187 2,749
60 57 76 94 110 137
180 179 152 104 147 148
979 1,248 2,517 3,315 2,081 2,771
126 96 157 125 - -
449 572 554 718 1,087 1,297
339 414 461 661 703 1,107
66 166 1,345 1,810 290 367
45 49 54 59 65 72
29 32 35 39 43 47
7 8 9 10 11 12
1 1 1 1 1 1
7 8 9 10 11 12
1,406 1,692 2,966 3,871 3,068 3,560
114 198 - 532 367 285
598 714 769 956 1,305 1,599
421 460 572 543 573 781
105 111 210 106 626 624
98 153 1,365 1,670 106 186
69 56 50 65 90 84
Asian Paints - Balance Sheet
(Enter values only in red cells)
Year / Rs Crore L-9 L-8 L-7 L-6 L-5
Net Sales 1,817 2,373 2,574 3,021 3,670
Expenditure
Increase/Decrease in Stock (38) 2 (61) (10) (70)
Raw Material Consumed 975 1,290 1,563 1,803 2,269
Employee Cost 120 183 199 219 257
Other Manufacturing Expenses 66 74 86 96 112
General and Administration Expenses 60 84 87 99 122
Selling and Distribution Expenses 301 358 297 345 411
Miscellaneous Expenses 56 85 68 79 85
Total Expenditure 1,540 2,076 2,239 2,630 3,187
Gross Profit 815 1,007 985 1,133 1,358
Operating Profit / EBITDA 278 297 335 391 483
Other Income 11 27 32 32 40
Depreciation 49 71 69 68 61
Profit Before Interest & Tax (PBIT) 240 253 298 354 462
Interest 14 15 11 11 24
Exceptional Income / Expenses - - - - (8)
Profit Before Tax 226 238 287 343 430
Provision for Tax 86 94 106 132 147
Profit After Tax 140 144 181 211 283
Minority Interest (1) (3) (7) 2 (2)
Share of Associate - 4 0 (1) (0)
Consolidated Profit After Tax (PAT) 139 145 174 212 281
Diluted EPS (Rs) 14.5 15.1 18.1 22.1 29.3
Interim Equity Dividend 29 34 38 67 115
Proposed Equity Dividend 42 48 53 53 10
Total Equity Dividend 70 82 91 120 125
Asian Paints - P&L Account
(Enter values only in red cells)
L-4 L-3 L-2 L-1 L CAGR
4,407 5,464 6,681 7,722 9,632 20.4%
(36) (27) (102) (151) (173)
2,613 2,866 3,227 3,906 5,099
301 365 433 454 526
122 682 797 922 1,073
145 167 200 206 269
535 646 801 969 1,207
63 91 89 85 120
3,743 4,790 5,445 6,391 8,122 20.3%
1,708 1,943 2,758 3,045 3,633 18.1%
664 674 1,236 1,331 1,510 20.7%
60 51 141 68 108
59 74 84 113 121
665 651 1,293 1,286 1,497 22.6%
26 32 37 26 43
(7) (1) 1 - -
631 617 1,257 1,260 1,454 23.0%
203 197 373 378 434
428 419 884 881 1,021 24.7%
(19) (22) (48) (38) (32)
- - - - -
409 398 836 843 989 24.4%
42.7 41.5 87.1 87.9 103.1
62 62 82 82 91
101 106 177 225 293
163 168 259 307 384 20.8%
Asian Paints - P&L Account
(Enter values only in red cells)
Year / Rs Crore L-9 L-8 L-7
Net cash (used in) / generated from operating activities 154 249 111
Payment for purchase of fixed assets (40) (44) (97)
Free Cash Flow 114 205 14
Net cash (used in) / generated from investing activities (70) (113) (74)
Net cash (used in) / generated from financing activities (59) (134) (42)
Net increase in cash and cash equivalents 24 2 (5)
Asian Paints - Cash Flow Statement
(Enter values only in red cells)
MINUS
Sample Cash Flow Statement (from Annual
L-6 L-5 L-4 L-3 L-2 L-1 L
179 258 480 389 1,063 762 826
(87) (82) (308) (310) (395) (156) (673)
92 176 172 79 668 606 153
(125) (109) (335) (270) (299) (440) (512)
(42) (111) (134) (230) (332) (334) (327)
12 38 11 (111) 432 (12) (12)
Asian Paints - Cash Flow Statement
(Enter values only in red cells)
Remember!
Cash flow, not reported earnings, is what determines
a company's long-term value.
Sample Cash Flow Statement (from Annual Report)
Remember!
Cash flow, not reported earnings, is what determines
a company's long-term value.
Operational & Financial Ratios L-9 L-8 L-7 L-6 L-5 L-4
Diluted Earnings Per Share (Rs) 14.5 15.1 18.1 22.1 29.3 42.7
Diluted Book Value Per Share (Rs) 49.8 55.2 59.1 67.4 81.1 102.4
Tax Rate (%) 38% 40% 37% 39% 34% 32%
Dividend Per Share (Rs) 7.3 8.5 9.5 12.5 13.0 17.0
Dividend Pay Out Ratio (%) 50% 56% 52% 57% 44% 40%
Profitability Ratios L-9 L-8 L-7 L-6 L-5 L-4
Gross Margin (%) 45% 42% 38% 38% 37% 39%
EBITDA Margin (%) 15% 13% 13% 13% 13% 15%
EBIT Margin (%) 13% 11% 12% 12% 13% 15%
Net Profit Margin (%) 8% 6% 7% 7% 8% 9%
Performance Ratios L-9 L-8 L-7 L-6 L-5 L-4
Return on Equity (%) 29% 27% 31% 33% 36% 42%
Return on Capital Employed (%) 60% 70% 52% 49% 66% 93%
Return on Invested Capital (%) 24% 25% 26% 29% 35% 47%
Sales/Working Capital (x) 8.2 12.4 7.8 7.3 8.6 9.9
Efficiency Ratios L-9 L-8 L-7 L-6 L-5 L-4
Receivable Days 51 41 42 42 42 38
Inventory Days 65 49 64 59 59 59
Payable Days 47 42 42 40 45 47
Growth Ratios L-9 L-8 L-7 L-6 L-5 L-4
Net Sales Growth (%) 31% 8% 17% 21% 20%
EBITDA Growth (%) 7% 13% 17% 24% 37%
PBIT Growth (%) 6% 18% 19% 30% 44%
PAT Growth (%) 4% 20% 22% 32% 46%
Financial Stability Ratios L-9 L-8 L-7 L-6 L-5 L-4
Total Debt/Equity (x) 0.4 0.3 0.4 0.4 0.4 0.3
Debt Burden (x) 1.7 0.8 16.7 2.8 1.0 1.0
Current Ratio (x) 1.4 1.3 1.5 1.6 1.4 1.4
Quick Ratio (x) 0.8 0.8 0.8 0.9 0.8 0.8
Interest Cover (x) 17.5 16.6 27.5 31.0 19.3 25.2
Asian Paints - Key Ratios
(Don't touch any cell on this sheet, as all are calculated figures)
L-3 L-2 L-1 L
41.5 87.1 87.9 103.1
125.4 178.3 228.0 286.5
32% 30% 30% 30%
17.5 27.0 32.0 40.0
42% 31% 36% 39%
L-3 L-2 L-1 L
36% 41% 39% 38%
12% 18% 17% 16%
12% 19% 17% 16%
7% 13% 11% 10%
L-3 L-2 L-1 L
33% 49% 39% 36%
90% 150% 86% 124%
34% 70% 67% 53%
12.2 12.0 7.8 12.2
L-3 L-2 L-1 L
38 30 27 30
51 52 62 61
37 39 51 49
L-3 L-2 L-1 L
24% 22% 16% 25%
1% 83% 8% 13%
-2% 99% -1% 16%
-3% 110% 1% 17%
L-3 L-2 L-1 L
0.3 0.1 0.1 0.1
1.9 0.2 0.2 1.0
1.2 1.2 1.5 1.3
0.9 0.9 0.8 0.7
20.0 35.2 49.5 34.5
Remember! What
counts in the long run is the increase in "per
share value", not overall growth or size of a
business.
Remember!
Gross margins suggest pricing power. Higher =
Better, but also invites competition. So watch out
for consistency.
Remember!
ROE = Efficiency in allocating capital, which is a
CEO's #1 job. Higher = Better. Look for
consistency.
Asian Paints - Key Ratios
(Don't touch any cell on this sheet, as all are calculated figures)
Remember! What
counts in the long run is the increase in "per
share value", not overall growth or size of a
business.
Remember!
Gross margins suggest pricing power. Higher =
Better, but also invites competition. So watch out
for consistency.
Remember!
ROE = Efficiency in allocating capital, which is a
CEO's #1 job. Higher = Better. Look for
consistency.
Initial Cash Flow 476
Years 1-5 6-10
FCF Growth Rate 15% 12%
Discount Rate 12%
Terminal Growth Rate 2%
Shares Outstanding (Crore) 10
Net Debt Level (762)
Year FCF Growth Present Value
1 547 15% 489
2 629 15% 502
3 724 15% 515
4 832 15% 529
5 957 15% 543
6 1,072 12% 543
7 1,200 12% 543
8 1,345 12% 543
9 1,506 12% 543
10 1,687 12% 543
Terminal Year 1,720
PV of Year 1-10 Cash Flows 5,292
Terminal Value 5,539
Total PV of Cash Flows 10,831
Number of Shares 10
DCF Value / Share (Rs) 1,209
Asian Paints: 2-Stage DCF
Final Calculations
Figures in Rs Crore | Enter values only in red cells
Why DCF?
The value of a business is simply the
present value of cash that investors
can take out of the business over its
lifetime.
Date of Analysis: 30/Oct/14
Price: 4,665.0 Return on Equity:
EPS: 103.1 Payout Ratio:
DPS: 40.0 P/E Ratio-High:
BVPS: 286.5 P/E Ratio-Low:
P/E: 45.3 P/E Ratio:
Earnings Yield: 2.2% Sustainable Growth
Dividend Yield: 0.9%
P/BV: 16.3
Govt. Bond Yield: 8.0%
Historical Company Data
Year EPS DPS BVPS High Low High
L-9 14.5 7.3 49.8 324 221 22.4
L-8 15.1 8.5 55.2 361 225 23.9
L-7 18.1 9.5 59.1 471 327 26.0
L-6 22.1 12.5 67.4 862 449 39.0
L-5 29.3 13.0 81.1 972 683 33.2
L-4 42.7 17.0 102.4 1,316 1,043 30.8
L-3 41.5 17.5 125.4 1,264 715 30.5
L-2 87.1 27.0 178.3 2,545 1,640 29.2
L-1 87.9 32.0 228.0 3,017 2,040 34.3
L 103.1 40.0 286.5 3,762 2,802 36.5
Annually Compounded Rates of Growth
Factor EPS DPS BVPS High Price Low Price
10-Year Growth 24.4% 20.8% 21.5% 31.3% 32.6%
5-Year Growth 28.6% 25.2% 28.7% 31.1% 32.6%
Projected Company Data Using Historical Earnings Growth Rate
Year EPS DPS
L (Current) 103.1 46.2 911.5 Earnings after 10 years
L+1 128.2 57.5 1,896.4 Sum of dividends paid over 10 years
L+2 159.4 71.4
L+3 198.2 88.8 23,170 Projected price (Average P/E * EPS)
L+4 246.5 110.5 25,066 Total gain (Projected Price + Dividends)
10-Year Averages
Asian Paints - Buffett Valuation Spreadsheet
P/E Ratio Price
Source - Buffettology by Mary Buffett & David Clark | (Enter values only in red cells)
Current Stock Data
L+5 306.5 137.4
L+6 381.2 170.8 18.3% Projected return using historical EPS growth rate
L+7 474.0 212.5 [(Total Gain / Current Price) ^ (1/10)] - 1
L+8 589.5 264.2
L+9 733.0 328.5
L+10 911.5 408.5
Projected Company Data Using Sustainable Growth Rate
Year BVPS EPS DPS
L (Current) 286.5 101.5 45.5 605.2 Earnings after 10 years (BVPS * ROE)
L+1 342.6 121.3 54.4 1,426.1 Sum of dividends paid over 10 years
L+2 409.5 145.1 65.0
L+3 489.6 173.4 77.7 15,383 Projected price (Average P/E * EPS)
L+4 585.2 207.3 92.9 16,809 Total gain (Projected Price + Dividends)
L+5 699.6 247.8 111.1
L+6 836.4 296.3 132.8 13.7% Projected return using sustainable growth rate
L+7 999.9 354.2 158.8
L+8 1,195.3 423.4 189.8
L+9 1,429.0 506.2 226.9
L+10 1,708.3 605.2 271.2
35.4%
44.8%
30.6
20.3
25.4
19.5%
Low ROEPayout Ratio
15.2 29.1% 50.5%
14.9 27.4% 56.3%
18.0 30.7% 52.3%
20.3 32.8% 56.5%
23.3 36.1% 44.4%
24.4 41.7% 39.8%
17.2 33.1% 42.2%
18.8 48.9% 31.0%
23.2 38.5% 36.4%
27.2 36.0% 38.8%
Earnings after 10 years
Sum of dividends paid over 10 years
Projected price (Average P/E * EPS)
Total gain (Projected Price + Dividends)
Warning! Past is
no predictor of the future. So be careful using
numbers in this sheet - that are based on past
numbers - into your fair value calculations. Of course
past can give some indications of the future, but the
future is never always the same.
10-Year Averages
Asian Paints - Buffett Valuation Spreadsheet
P/E Ratio
Source - Buffettology by Mary Buffett & David Clark | (Enter values only in red cells)
Projected return using historical EPS growth rate
[(Total Gain / Current Price) ^ (1/10)] - 1
Earnings after 10 years (BVPS * ROE)
Sum of dividends paid over 10 years
Projected price (Average P/E * EPS)
Total gain (Projected Price + Dividends)
Projected return using sustainable growth rate
Warning! Past is
no predictor of the future. So be careful using
numbers in this sheet - that are based on past
numbers - into your fair value calculations. Of course
past can give some indications of the future, but the
future is never always the same.
Year L-9 L-8 L-7 L-6 L-5 L-4 L-3
Diluted EPS (Rs) 14.5 15.1 18.1 22.1 29.3 42.7 41.5
Stock Price - High (Rs) 324 361 471 862 972 1,316 1,264
High P/E (x) 22.4 23.9 26.0 39.0 33.2 30.8 30.5
Stock Price - Low (Rs) 221 225 327 449 683 1,043 715
Low P/E (x) 15.2 14.9 18.0 20.3 23.3 24.4 17.2
Average P/E (x) 18.8 19.4 22.0 29.6 28.2 27.6 23.9
Graham Number 773
Avg P/E Ratio Valuation 2,356
EPV 859
DCF 1,209
Historical Earnings Growth 7,460
Sustainable Earnings Growth 4,953
High End 2,935
Low End 1,578
Margin of Safety (MoS) 50%
Fair Value after MoS 1,128
Current Mkt. Price (CMP, Rs) 4,665
Premium / (Discount) 313.5%
Fair Value Range (Rs/Share)
Valuation - Different Methods (Rs)
Asian Paints - Fair Value Calculation
(Enter values only in red cells)
Remember!
Give importance to a stock's fair value only "after" you have answered
in "Yes" to these two questions - (1) Is this business simple to be
understood? and (2) Can I understand this business?
Don't try to quantify everything. In stock research, the less non-
mathematical you are, the more simple, sensible, and useful will be
your analysis and results. Great analysis is generally "back-of-the-
envelope".
Also, your calculated "fair value" will be proven wrong in the future, so
don't invest your savings just because you fall in love with it. Don't
look for perfection. It is overrated. Focus on decisions, not outcomes.
Look for disconfirming evidence. Pray!
L-2 L-1 L
87.1 87.9 103.1
2,545 3,017 3,762
29.2 34.3 36.5
1,640 2,040 2,802
18.8 23.2 27.2
24.0 28.8 31.8
Asian Paints - Fair Value Calculation
(Enter values only in red cells)
Remember!
Give importance to a stock's fair value only "after" you have answered
in "Yes" to these two questions - (1) Is this business simple to be
understood? and (2) Can I understand this business?
Don't try to quantify everything. In stock research, the less non-
mathematical you are, the more simple, sensible, and useful will be
your analysis and results. Great analysis is generally "back-of-the-
envelope".
Also, your calculated "fair value" will be proven wrong in the future, so
don't invest your savings just because you fall in love with it. Don't
look for perfection. It is overrated. Focus on decisions, not outcomes.
Look for disconfirming evidence. Pray!