Asian Paints equity valuation

8/12/2019 Asian Paints equity valuation

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2/24

ADD: Depreciation 80.85Adjust for changes in net working capital:

Subtract: Increase in current assets -15Add: Increase in current liabilities 8Net Cash from operating activities 341.451

Cash flow from investing activitiesAcquisitions of fixed assets - capital expenditure -157.85Purchase of investment securities 0

Proceeds from sales of investment securities 0Net Cash used in investing activities -157.85

Cash flow from financing activitiesNet proceeds from borrowing activities 0

Net proceeds from stock issue, repurchase 0dividend paid -107.327

Net cash from financing activities -107.327

Net increase in cash and cash equivalents 76.27438Check: Changes in cash and mkt. securities 76.27438

Balances from the consolidated statement of cash flows in fact match those in the project balance sh

Valueing the FirmWeighted Average Cost of Capital 20%

Long term Free Cash Flow Growth Rate 5%

Year 0 1Free Cash Flow 197.13Terminal Value

Total 197.13

Enterprise Value, Present Value of FCF (row 79) Rs. 1,508.03Add: Initial Cash & Marketable Securities Balance at Year 0 Rs. 80.00

Asset Value in Year 0 Rs. 1,588.03Subtract: Value of Firm Debt -Rs. 320.00

Equity Value Rs. 1,268.03

Sensitivity AnalysisRs. 1,268.03

0% 1232.8074122% 1245.6966554% 1258.4228046% 1267.3344298% 1271.602187


3/24

10% 1268.02763812% 1263.3231714% 1250.21536816% 1232.39975118% 1205.68143820% 1173.58646

22% 1129.98593824% 1077.01166926% 1017.29235228% 943.97263


4/24

2 3 4 5

1210 1331 1464.1 1610.51

605 665.5 732.05 805.25532 32 32 3215.99454272 23.45012 31.90927 41.48503887

88.935 97.8285 107.6114 118.372485500.0595427 559.1216 624.3479 696.3675539

200 224 250 279300.0595427 335.1216 374.3479 417.3675539120.3447364 134.4071 150.1395 167.393404179.7148063 200.7146 224.2084 249.9741499

243.5891873 342.6637 455.0681 582.0578849181.5 199.65 219.615 241.5765

1401.485 1592.484 1802.582 2033.690035469.785 567.6135 675.2249 793.597335

931.7 1024.87 1127.357 1240.09271356.789187 1567.184 1802.04 2063.727085

96.8 106.48 117.128 128.8408320 320 320 320

450 450 450 450489.9891872 690.7037 914.9121 1164.8862711356.789187 1567.184 1802.04 2063.727071

2 3 4 5

300.0595427 335.1216 374.3479 417.367553988.935 97.8285 107.6114 118.372485-16.5 -18.15 -19.965 -21.96158.8 9.68 10.648 11.7128

-173.635 -190.999 -210.098 -231.10818519.2 19.2 19.2 19.2

-9.59672563 -14.0701 -19.1456 -24.89102332217.2628171 238.6115 262.5984 288.6921305

2 3 4 5

300.0595427 335.1216 374.3479 417.3675539

SALES GROWTHCURRENT ASSET/SALES

CURRENT LIABILITIES/SALESNET FIXED ASSETS/SALES

COST OF GOODS SOLD/SALES

DEPRECIATION RATEINTEREST RATE ON DEBTNTEREST Earned ON CASH AND SECURITIE

TAX RATEDIVIDEND PAYOUT RATIO


5/24

88.935 97.8285 107.6114 118.372485

-16.5 -18.15 -19.965 -21.96158.8 9.68 10.648 11.7128

381.2945427 424.4801 472.6423 525.4913389

-173.635 -190.999 -210.098 -231.1081850 0 0 00 0 0 0

-173.635 -190.999 -210.098 -231.108185

0 0 0 00 0 0 0

-120.3447364 -134.407 -150.14 -167.393404-120.3447364 -134.407 -150.14 -167.393404

87.31480633 99.07455 112.4044 126.989749987.31480644 99.07455 112.4044 126.9897603

eet of the proforma model.

Inflation Rate 3% Real Growth 2%

2 3 4 5217.26 238.61 262.60 288.69

Rs. 2,020.84217.26 238.61 262.60 Rs. 2,309.54

1268Growth 2%

4%6%

8%10%12%14%16%18%20%22%24%

100000%

120000%

140000%


6/24

26%28%30%32%

0%

20000%

40000%

60000%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Series1

Series2


7/24

10%15%8%

77%50%

10%10%8%

40%40%


8/24

WACC2% 4% 6% 8% 10% 12% 14% 16% 18%NA 2485.286 2273.501 2083.063 1911.437 1756.428 1616.135 1488.901 1373.286NA NA 2273.501 2083.063 1911.437 1756.428 1616.135 1488.901 1373.286NA NA NA 2083.063 1911.437 1756.428 1616.135 1488.901 1373.286

NA NA NA NA 1911.437 1756.428 1616.135 1488.901 1373.286NA NA NA NA NA 1756.428 1616.135 1488.901 1373.286NA NA NA NA NA NA 1616.135 1488.901 1373.286NA NA NA NA NA NA NA 1488.901 1373.286NA NA NA NA NA NA NA NA 1373.286NA NA NA NA NA NA NA NA NANA NA NA NA NA NA NA NA NANA NA NA NA NA NA NA NA NANA NA NA NA NA NA NA NA NA


9/24

NA NA NA NA NA NA NA NA NANA NA NA NA NA NA NA NA NANA NA NA NA NA NA NA NA NANA NA NA NA NA NA NA NA NA


10/24


11/24

20% 22% 24% 26% 28% 30% 32% 34% 36%1268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.43041268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.43041268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.4304

1268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.43041268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.43041268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.43041268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.43041268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.43041268.028 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.4304

NA 1172.022 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.4304NA NA 1084.298 1004.003 930.3829 862.773 800.5834 743.2909 690.4304NA NA NA 1004.003 930.3829 862.773 8 00.5834 743.2909 690.4304


12/24

NA NA NA NA 930.3829 862.773 800.5834 743.2909 690.4304NA NA NA NA NA 862.773 800.5834 743.2909 690.4304NA NA NA NA NA NA 800.5834 743.2909 690.4304NA NA NA NA NA NA NA 743.2909 690.4304


13/24


14/24

38%641.5875641.5875641.5875

641.5875641.5875641.5875641.5875641.5875641.5875641.5875641.5875641.5875


15/24


16/24

Year 02012-13

Income Statement (in Crores)Sales 11075.03

Cost of Goods Sold/Expenses 9238.8Interest payments on debt (Finance Cost) 36.04Interest earned on cash and marketable securities (Finance Income) 10.23Depreciation 154.6Profit before tax 1655.21Taxes @ 30.9% 511.45989Profit After Tax 1143.75011Dividends 515.52Retained Earnings 628.23011

Balance SheetCash and Marketable securities 1473.86Current Assets 2909.36Fixed AssetsAt Cost 3385.14Depreciation 979.4Net Fixed Assets 2405.74Total Assets 6788.96

Current Liabilities 2931.41Debt 312.49

Stock 256.69Accumulated Retained Earnings 3288.37Total Liabilities and Equity 6788.96

Year 0Free Cash Flow Calculation

Profit After TaxADD: Depreciation

SUBTRACT: Increase in Current AssetsADD: Increase in Current Liabilities

SUBTRACT: Increase in Fixed Assets at CostADD: After Tax Interest on Debt

SUBTRACT: After Tax Interest on Cash & Marketable Securities

Valueing the FirmWeighted Average Cost of Capital 9.35%

ASIAN PAINTS: How Financial Model Work?


17/24

Long term Free Cash Flow Growth Rate 8.00%

Year 0Free Cash FlowTerminal Value

Total

Enterprise Value, Present Value of FCFAdd: Initial Cash & Marketable Securities Balance at Year 0

Asset Value in Year 0Subtract: Value of Firm Debt

Equity ValueNo. of Outstanding Shares

Value per Share as per ModelMarket Value as on 31/03/2013


18/24

1 2 3 4

(in Crores)13278.96097 15921.4742 19089.84757 22888.72724

11037.55362 13186.51663 15753.87327 18821.0829236.04 36.04 36.04 36.0410.37738643 11.0853733 12.48440661 14.52686465774.4724064 935.9368106 1118.15958 1335.8603191441.272333 1774.066135 2194.25913 2710.270865562 692 856 1057879.2723331 1082.066135 1338.25913 1653.270865396.3125067 487.7173162 603.1906276 745.1751819482.9598264 594.348819 735.0685024 908.095683

1516.328613 1677.862645 1919.452609 2266.3860493437.044297 4060.437175 4796.89775 5666.93364

4701.813276 6211.701174 8015.557586 10170.616891753.872406 2689.809217 3807.968797 5143.8291172947.94087 3521.891957 4207.588789 5026.7877717901.31378 9260.191778 10923.93915 12960.10746

3560.803954 4325.333132 5254.012 6382.08463312.49 312.49 312.49 312.49

256.69 256.69 256.69 256.693771.329826 4365.678645 5100.747148 6008.8428317901.31378 9260.191778 10923.93915 12960.10746

1 2 3 4

879.2723331 1082.066135 1338.25913 1653.270865774.4724064 935.9368106 1118.15958 1335.860319-527.6842972 -623.3928783 -736.4605746 -870.0358903629.3939537 764.5291784 928.6788683 1128.072629

-1316.673276 -1509.887898 -1803.856413 -2155.05930121.624 21.624 21.624 21.624

6.226431855 -6.651223978 -7.490643966 -8.716118792466.6315518 664.2241245 858.9139473 1105.016503


19/24

Inflation Rate 7.00%

1 2 3 4466.63 664.22 858.91 1105.02

466.63 664.22 858.91 1105.02

Rs. 75,749.53Rs. 1,473.86

Rs. 77,223.39Rs. 312.49

Rs. 76,910.90Rs. 9.95

Rs. 7,729.74Rs. 4,917.25 undervalued, u should buy


20/24

Assumptions

5

27443.58396

22485.4647636.0417.410637161595.9464323343.54340113042039.543401919.27896241120.264439

2750.3962956694.772029

12745.256736739.7755496005.48118215450.64951

7752.362236312.49

256.697129.1072715450.64951

5

2039.5434011595.946432-1027.8383891370.277606

-2574.63984321.624

-10.44638231414.466826

Rm 16%Beta 0.47189

COST OF GOODS SOLD/SALES

SALES GROWTHCURRENT ASSET/SALESCURRENT LIABILITIES/SALESNET FIXED ASSETS/SALES

DEPRECIATION RATEINTEREST RATE ON DEBTINTEREST Earned ON CASH AND SECURITIESTAX RATEDIVIDEND PAYOUT RATIO

Dividend Payout Ratio

CURRENT ASSET/SALESCURRENT LIABILITIES/SALESNET FIXED ASSETS/SALESCOST OF GOODS SOLD/SALES


21/24


22/24

0 1 2 3 4 519.90% 19.90% 19.90% 19.90% 19.90% 19.90%26.27% 25.88% 25.50% 25.13% 24.76% 24.39%26.47% 26.82% 27.17% 27.52% 27.88% 28.25%21.72% 22.20% 22.12% 22.04% 21.96% 21.88%83.42% 83.12% 82.82% 82.52% 82.23% 81.93%

28.93% 28.93% 28.93% 28.93% 28.93% 28.93%11.53% 11.53% 11.53% 11.53% 11.53% 11.53%0.69% 0.69% 0.69% 0.69% 0.69% 0.69%

30.90% 30.90% 30.90% 30.90% 30.90% 30.90%45.07% 45.07% 45.07% 45.07% 45.07% 45.07%

CAGR-1.47%1.31%2.20%-0.36%


23/24

Date Close2-Jan-91 318.95 Rm1-Jan-92 572.82 79.60% 20.19%4-Jan-93 744.92 30.04%3-Jan-94 1083.74 45.48% Rf 2-Jan-95 1182.14 9.08% Tax Adjusted Rf

1-Jan-96 908.01 -23.19% CAPM1-Jan-97 939.55 3.47% Tax Adjusted CAPM1-Jan-98 1081.2 15.08% Weight of Equity1-Jan-99 890.8 -17.61% Weight of Debt3-Jan-00 1592.2 78.74%1-Jan-01 1254.3 -21.22%1-Jan-02 1055.3 -15.87%1-Jan-03 1100.15 4.25%1-Jan-04 1912.25 73.82%3-Jan-05 2115 10.60%2-Jan-06 2835.95 34.09%2-Jan-07 4007.4 41.31%1-Jan-08 6144.35 53.33%1-Jan-09 3033.45 -50.63%4-Jan-10 5232.2 72.48%3-Jan-11 6157.6 17.69%2-Jan-12 4636.75 -24.70%1-Jan-13 5950.85 28.34%


24/24

91 day T-Bill Beta Tax Rate8.94% 0.47189 30%6.26%

14.25%12.83%

Documents

Asian Paints equity valuation