Paint Stocks In India: Decorative paints make our lives way more colourful. In the stock market, however, the paint industry is already popular among investors thanks to the multifold returns it has provided in the past. In this article, we take a look at the industry and the top paint stocks in India. Keep Reading to find out.
Indian Paint Industry
The Indian Paint industry has achieved a CAGR of 11% from FY11-FY19 is estimated to be worth over Rs. 70,000 crores. The industry is closely associated with GDP growth. For instance, throughout history, the Indian paint sector rise has been in the range of 1.5x and 2x of GDP. This can be easily understood as the overall economy grows, increased income and industrial production lead to more consumption of paints and coatings.
This makes the industry hard to ignore and many investors still look for investment opportunities in it. So before we dive into the top stocks let us understand the industry better.
The Paint Industry is divided into 2 segments – the industrial and the decorative. The Indian decorative segment which covers 75% of the market covers exterior and interior wall paints, wood finishes, enamel, and ancillary products.
The industrial segment on the other hand covers the remaining 25% and includes automotive, powder, and protective coatings.
Despite enjoying many decades of growth the Industry is currently catching up with the increasing raw material prices. When it comes to producing paint products, raw materials make up 55-60% of the total cost.
Some of the important raw materials include crude oil, pigments like titanium dioxide, solvents like mineral turpentine, resins, and additives.
Out of these the rise in prices of titanium dioxide which makes up 20% of the raw material cost and crude oil has had the biggest impact on the paint companies’ profit margins.
In addition to this, the stop of construction and other activities has further affected the paint industry over the last few years.
Companies have also adapted to these challenges by increasing the prices of the products which finally allows them to regain their profit margins.
The sector is likely to see consolidation and formalization going forward. Along with setting up new greenfield plants, most leading manufacturers have announced brownfield expansion plans. This will result in a healthy growth rate for the industry in the future.
In addition to this, Aditya Birla Group-owned Grasim Industries has announced its foray into the paints industry. The company has earmarked an investment of ₹5,000 crores over the next three years.
Top Paint Stocks In India
Now let us take a look at the top companies in the Indian Paint Industry.
Top Paint Stocks In India #1 – Asian Paints
|Face Value (₹): 1||ROE (%): 23.2|
|Market Cap (Cr): ₹2,95,817 Cr||Net Profit Margin: 7.78%|
|EPS (₹): 24.5||Current Ratio: 1.66|
|Stock P/E (TTM): 92.2||Debt to Equity: 0.03|
|Dividend Yield (%): 0.63||Promoter’s Holdings (%): 52.6%|
Founded in 1942, Asian paints is India’s largest and Asia’s third-largest paint company. The company was founded by 4 friends during the temporary ban on paint imports in India during WW2.
Taking advantage of this and despite starting small, the company was the country’s leading paint manufacturer by 1967. Today the company has 26 manufacturing facilities across 15 countries and provides its products across 65 countries.
Now let us take a look at the financials of the company. Being the largest company in the country the company has a Mcap of Rs. 2,95,817 crores. When we take a look at the revenues they have impressively grown from Rs.15,061 cr in 2017 to Rs. 29,101 cr in 2022.
And this has been reflected in the profits as well as they have increased from Rs. 1940 cr to Rs. 3,031 cr in 2022. Its 5-year profit CAGR stands at 9.33%.
This is further expected to improve as the company has had 2 price hikes in 2021 taking the cumulative hike to around 21-22% for the year. In addition to this, the company comes with very minimal debt.
It has a debt-equity ratio of 0.011. The financials of the company keep getting better as it has provided a good ROE and ROCE of 23.2% and 29.7% as of March 2021. However, the stock currently trades at a PE of 96 which is way above the industry average of 84.
Top Paint Stocks In India #2 – Berger Paints
|Face Value (₹): 1||ROE (%): 22.8|
|Market Cap (Cr): ₹56,474 Cr||Net Profit Margin: 9.5%|
|EPS (₹): 8.57||Current Ratio: 1.42|
|Stock P/E: 67.8||Debt to Equity: 0.26|
|Dividend Yield (%): 0.53||Promoter’s Holdings (%): 75|
Founded in 1923, Berger Paints is 2nd largest Indian paint manufacturer. The company has 16 manufacturing units in India, 2 in Nepal, and 1 in Poland and Russia.
In addition to this, the company also has a network of over 25,000 dealers across the country.
Let us take a look at the financials of the company. Being the 2nd largest company in the country, the company has a Mcap of Rs. 56,474 crores. When we take a look at the revenues they have impressively grown from Rs.4,552 cr in 2017 to Rs. 8,762 cr in 2022.
The company has achieved a 5 yr sales CAGR of 14% which is even higher than that of Asian Paints. The increasing trend has been reflected in the profits as well as they have increased from Rs. 463 cr in 2017 to Rs. 833 cr in 2022.
Its 5-year profit CAGR stands at 12%. Its profits however could further improve as the company has had price hikes of 18-19% in the last year. In addition to this, the company comes with very minimal debt with a debt-equity ratio of 0.26.
The financials of the company keep getting better as it has provided a good ROE and ROCE of 22.8% and 26.2% as of March 2022. The stock currently trades at a PE of 68 which is below the industry average of 84.
Top Paint Stocks In India #3 – Kansai Nerolac
|Face Value (₹): 1||ROE (%): 8.2|
|Market Cap (Cr): ₹21,727 Cr||Net Profit Margin: 5.22%|
|EPS (₹): 8.12||Current Ratio: 2.28|
|Stock P/E: 65.3||Debt to Equity: 0.05|
|Dividend Yield (%): 0.54||Promoter’s Holdings (%): 75%|
Founded in 1920, Kansai Nerolac is the third largest paint company in the country. The company is a subsidiary of Kansai Paints a Japanese company and has a 15.4% market share i.e. the third-largest in the country.
The company has a market cap of Rs. 21,727 cr. If we take a look at the revenue and profit trends of the company it is the only company on this list whose revenues have suffered.
The company’s profits have declined from Rs. 509 cr. in 2017 to Rs. 359 cr in 2022. The company has had a low 5 year Sales CAGR of 9.46%.
The company however has a low debt-equity of 0.05.
The company has offered an ROE and a ROCE of 8.2% and 11.4%. This is lower than other companies on this list. The company has a PE of 58.46 which is lower than other companies on this list.
Top Paint Stocks In India #4 – Indigo Paints
|Face Value (₹): 10||ROE (%): 13.8|
|Market Cap (Cr): ₹6,613 Cr||Net Profit Margin: 9.8%|
|EPS (₹): 17.7||Current Ratio: 2.34|
|Stock P/E: 79||Debt to Equity: 0.02|
|Dividend Yield (%): 0.00||Promoter’s Holdings (%): 54%|
Indigo Paints was founded in 2000, by IITian Hemant Jalan in Jodhpur. He started the company as he felt that there was a big market for Cement Paints.
However, in order to compete with other established paint giants, he introduced differentiated products in the industry. Indigo paints introduced Metallic paints in India which gave a unique look. This product was welcomed by retailers even with the lack of advertisement.
The company has a market cap of Rs. 6,613 cr. Impressively the company’s revenues and profits have been on an increasing trend from 2018. The company earned revenues of Rs. 289 cr in 2017 which increased to Rs. 906 cr in 2022.
Its profits during this period increased from a loss of Rs. 15 cr to a profit of Rs. 84 cr. The company has no debt. Indigo Paints has given an ROE of 13.8% and a ROCE of 18.7%. The company has a PE of 79, close to the industry average.
Here Is A List Of All Paint Stocks In India
|Name of the Company||Market Cap (Rs. in cr)|
Here we took a look at the top companies in the paint industry. However, investors must consider several factors before investing in the company. The growth in the paint industry depends on various factors.
These include disposable income, crude oil prices, and also other industries like real estate and the automotive industry. In addition to this with the government focusing on industrial growth the construction activity over the next 5 years is expected to bring more opportunity for this industry.
According to ICICI Securities, the industry currently has many players and this is eventually going to lead to the profit pool shrinking in FY22-23.
This will lead to the market leaders protecting their market share and volumes even at the cost of profitability. That’s all for this post! Let us know what you feel about investing in the paint industry in the comments below. Happy Investing!
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
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