Consumer · investment research
Asian Paints
ASIANPAINT
Verdict
NO ACTION
medium confidence · 3-5 years
Composite score
46/100
Weighted across all eight pillars
Business quality
45/100
Moat, returns, balance sheet, cash, management
Valuation score
27/100
At 51.0x against a sector median of 51.0x, the price embeds roughly 35% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
No action. Nothing here is compelling enough to deploy capital today.
WHY
- • Industry & macro scores 88/100 (improving) — Consumer (India) demand is improving.
- • Valuation scores 27/100 (stable) — At 51.0x against a sector median of 51.0x, the price embeds roughly 35% earnings growth. Anything less has to come out of the multiple.
- • Balance sheet scores 28/100 (improving) — Leverage is serviceable from current cash generation.
- • Business & moat scores 35/100 (deteriorating) — Scale and integrated operations keep unit costs below most listed peers.
WHERE
Consumer · Mid cap · position sized to at most 0% of an equity portfolio.
WHEN
Re-run this analysis after the next quarterly result.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 14% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹2,458 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Leverage — Debt is 2.7x EBITDA.
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check GDP growth — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
Asian Paints is a competitively exposed consumer business compounding revenue at 10.8% and profit at 4.5%, earning 18.3% on capital. Quality scores 45/100 and valuation 27/100 at 51.0x. The decision is therefore no action with medium confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
Asian Paints operates in the Indian consumer sector with a mid-cap footprint and a listed market value of about ₹228k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Capacity utilisation
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Interest cost on borrowings
- • Distribution and marketing spend
Moat · 28/100
Cost leadership
Scale and integrated operations keep unit costs below most listed peers.
Segment mix
Growth 23.4% · margin 19.9% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 36.7% · margin 33% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth -4.6% · margin 24.4% — Flat to declining; drags the consolidated growth rate.
Growth 10.1% · margin 20.4% — Growing broadly in line with the overall business.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
35/100Trend: deteriorating · weight 14%
- MoatCost leadership
Scale and integrated operations keep unit costs below most listed peers.
- Segment concentrationJewellery & watches is 14% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin18.0%
Margin moved from 34.0% to 18.0% year on year.
Profitability & returns
59/100Trend: improving · weight 16%
- ROCE18.3%
ROCE was 14.2% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE21.4%
Return on equity after leverage — read alongside debt levels.
- Net margin8.8%
Share of every rupee of revenue that reaches reported profit.
Growth quality
36/100Trend: deteriorating · weight 15%
- Revenue CAGR (4y)10.8%
Top-line compounding over the reported history.
- Profit CAGR (4y)4.5%
Profit lags revenue, so growth is being bought with margin.
- Growth sourceCapex-led (organic)
Capex is 11.0% of revenue this year.
Balance sheet
28/100Trend: improving · weight 12%
- Debt / EBITDA2.70x
Leverage is serviceable from current cash generation.
- Debt / equity0.98x
Capital structure relative to shareholder funds.
- Working capital21 days
Cycle is tight, so growth is largely self-funding.
Cash conversion
54/100Trend: stable · weight 13%
- OCF / PAT92%
Reported profit is backed by operating cash.
- Free cash flow₹-1,902 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
49/100Trend: improving · weight 14%
- Guidance delivery64% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding48.8% (+1.69 y/y)
Promoter ownership is stable or rising.
- PledgeNo pledge
No pledge disclosed in the sample data.
- Institutional flowFII -2.16 · DII +1.09
Direction of institutional ownership over the last year.
- Capital allocationSurplus cash is largely returned to shareholders…
Surplus cash is largely returned to shareholders rather than reinvested.
Industry & macro
88/100Trend: improving · weight 8%
- Demand trendimproving
Consumer (India) demand is improving.
- StructureFragmented
Fragmented — share shifts are possible but price competition is real.
- Competitive intensitylow
How hard it is to keep pricing and share.
- Macro driversGDP growth, Inflation, Interest rates
Variables that move the earnings base regardless of company execution.
Valuation
27/100Trend: stable · weight 8%
- P/E vs sector51.0x vs 51.0x
At 51.0x against a sector median of 51.0x, the price embeds roughly 35% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted11.33 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield-0.83%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹43,678 Cr | ₹7,862 Cr | ₹4,874 Cr | ₹4,094 Cr | ₹-1,147 Cr | 21.2% |
| FY2023 | ₹49,236 Cr | ₹7,878 Cr | ₹5,357 Cr | ₹4,607 Cr | ₹2,638 Cr | 13.5% |
| FY2024 | ₹54,794 Cr | ₹15,890 Cr | ₹10,329 Cr | ₹9,090 Cr | ₹3,063 Cr | 18.7% |
| FY2025 | ₹60,352 Cr | ₹20,520 Cr | ₹8,413 Cr | ₹7,572 Cr | ₹5,158 Cr | 14.2% |
| FY2026 | ₹65,910 Cr | ₹11,864 Cr | ₹5,813 Cr | ₹5,348 Cr | ₹-1,902 Cr | 18.3% |
No accounting-quality flags in the sample data.
Ownership & management
Who owns it, and have they delivered?
Promoter
48.8%
+1.69 y/y
Pledge
None
No disclosed pledge
FII
17%
-2.16 y/y
DII
19.8%
+1.09 y/y
Guidance delivered in 64% of the last eight quarters; average leadership tenure 12 years.
Surplus cash is largely returned to shareholders rather than reinvested.
- ⚠ Related-party transactions at 8.9% of revenue
Industry & macro context
Consumer (India)
Demand trend
improving
Cyclicality
medium
Competition
low
Regulatory pressure
low
Fragmented — share shifts are possible but price competition is real.
Macro drivers: GDP growth · Inflation · Interest rates
Valuation
fair versus the sector
P/E
51.0x
Sector median P/E
51.0x
P/B
2.68x
Earnings yield
1.96%
FCF yield
-0.83%
PE / growth
11.33
Estimated fair-value band ₹2,458 – ₹3,141 , built on FY2026 EPS of ₹60.7. Gap to the current price: +17.6%. Ranges are a modelling output, not a target price.
At 51.0x against a sector median of 51.0x, the price embeds roughly 35% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Leveragemedium
Debt is 2.7x EBITDA.
Monitor: Quarterly gross debt and interest coverage.
- Governancehigh
Related-party transactions at 8.9% of revenue
Monitor: Annual report disclosures and auditor commentary.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 18.3% | stays above 15% | falls for two consecutive years |
| Cash conversion | 92% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 10.8% CAGR | tracks the 35% priced in | slows for two quarters with no margin offset |
| Promoter holding | 48.8% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 72/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.