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    ASIANPAINT.NS · NSI · Basic Materials

    Asian Paints Limited

    Also onConsensus Drift

    Implied value per share

    INR 530.74

    Market price

    INR 2451.30

    Implied upside

    -78.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 5.2% of revenue against depreciation of 2.8%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Current EV/EBITDA of 33.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    INR 530.74-78.3%
    Exit multiple
    INR 1150.45-53.1%
    Market price
    INR 2451.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn19bn39bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 359.3bnINR 363.3bnINR 367.3bnINR 371.4bnINR 375.5bn+1.1%
    EBITINR 58.9bnINR 59.6bnINR 60.2bnINR 60.9bnINR 61.6bn+1.1%
    NOPATINR 44.1bnINR 44.6bnINR 45.0bnINR 45.5bnINR 46.0bn+1.1%
    Add depreciation & amortisationINR 10.2bnINR 10.4bnINR 10.5bnINR 10.6bnINR 10.7bn+1.1%
    Less capital expenditureINR -18.7bnINR -18.9bnINR -19.1bnINR -19.4bnINR -19.6bn+1.1%
    Less increase in working capitalINR 1.4bnINR 1.4bnINR 1.4bnINR 1.5bnINR 1.5bn-1.1%
    Free cashflow to firmINR 37.0bnINR 37.4bnINR 37.8bnINR 38.2bnINR 38.7bn+1.1%
    Discount factor0.94980.85680.77290.69720.6289-
    Present valueINR 35.1bnINR 32.0bnINR 29.2bnINR 26.7bnINR 24.3bn-8.8%
    Present Value Of The ForecastINR 147.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.519Reported 0.282, pulled toward 1.0 (Blume)
    Cost of equity10.95%Risk-free + beta x equity risk premium
    Cost of debt6.80%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationINR 2349.9bn98.4% of capital
    Total debtINR 39.3bn1.6% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC10.86%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR 530.74

    68% of EV

    Forecast FCFF, final year
    INR 38.7bn
    Capex at depreciation, working capital in reinvestment
    INR 46.2bn
    Less reinvestment at g/ROIC (11.7% of NOPAT)
    INR -5.4bn
    Capitalised
    INR 40.8bn
    ROIC (reported)
    21.3%
    Terminal value, undiscounted
    INR 500.5bn
    Terminal value, discounted
    INR 314.8bn
    Enterprise value
    INR 462.1bn
    Less net debt
    INR -46.7bn
    Equity value
    INR 508.9bn

    Exit at 20.0x EBITDA

    Value per shareINR 1150.45

    86% of EV

    Terminal value, undiscounted
    INR 1445.2bn
    Terminal value, discounted
    INR 908.9bn
    Enterprise value
    INR 1056.3bn
    Less net debt
    INR -46.7bn
    Equity value
    INR 1103.0bn

    Spread between methods: 74%.

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.86%631.26652.79677.58706.48740.63
    9.86%562.35577.29594.17613.40635.53
    10.86%508.23518.89530.74544.01558.98
    11.86%464.60472.36480.88490.28500.72
    12.86%428.70434.44440.66447.45454.90

    Outlined: this model. Green text: above today's price of 2451.30. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year1.1%38.8%+37.7pp
    EBIT margin16.4%78.1%+61.7pp
    Discount rate10.9%4.1%-6.7pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.