Asian Paints (ASIPAI) 843

Result Update Rating matrix Rating : Buy Target : 951 Target Period : 12 months Potential Upside : 13% What s Changed? Target Changed from 729 to 951 EPS FY16E Changed from 17.5 to 19.2 EPS FY17E Changed from 2.6 at 23.5 Rating Unchanged Quarterly Performance Q1FY16 Q1FY15 YoY (%) Q4FY15 QoQ (%) Revenue 3,578. 3,325.4 7.6 3,49.4 2.5 EBITDA 683.5 556.5 22.8 559.2 22.2 EBITDA (%) 18.9 16.6 231bps 15.8 35bps PAT 455.2 338.7 34.4 341. 33.5 Key Financials Crore FY14 FY15E FY16E FY17E Revenue 12,715 14,183 15,878 17,952 EBITDA 1,997.9 2,235.4 2,898.9 3,38.7 Net Profit 1,218.8 1,395.2 1,844.2 2,258.7 EPS ( ) 12.7 14.5 19.2 23.5 Valuation summary FY14 FY15E FY16E FY17E P/E 64.2 56.1 42.4 34.7 Target P/E 74.9 65.4 49.5 4.4 EV / EBITDA 39.9 35.9 27.6 23.5 P/BV 19.4 16.5 14.4 12. RoNW (%) 34. 32.5 37. 38.4 RoCE (%) 47.4 44.9 5.9 51.5 Stock data Particular Amount Market Capitalization ( Crore) 8,764.6 Total Debt (FY15) ( Crore) 78.3 Cash and Investments (FY15) ( Crore) 59.3 EV ( Crore) 8,252.6 52 week H/L ( ) 922/577 Equity capital ( Crore) 95.9 Face value ( ) 1. Price performance (%) 1M 3M 6M 12M Asian Paints 1.4 2.7 (4.1) 37.5 Berger Paints 16.5 4.5 (5.9) 47.7 Kansai Nerolac 23.3 13.6 8.1 61.7 Akzo Noble 2.4 (8.1) (9.3) 17.4 Research Analyst Sanjay Manyal sanjay.manyal@icicisecurities.com Hitesh Taunk hitesh.taunk@icicisecurities.com July 22, 215 Asian Paints (ASIPAI) 843 Lower end products drive volume growth Asian Paints (APL) recorded sales growth of ~8% YoY led by ~11% YoY growth in sales volume. Growth in sales volume was largely supported by lower end products and persistent demand from rural India. In the quarter, APL has passed on the benefit of lower raw material cost by cutting price ~3% YoY Saving in raw material cost to the tune of 367 bps YoY was partially offset by ~16 bps YoY rise in other expenses. As a result, the operating margin improved ~231 bps YoY. In addition, other income increased 55% YoY to 73.5 crore mainly due to one-time event like sale of land and higher treasury income. This supported sharp growth in net profit by 34% YoY to 455 crore We have modelled ~13% revenue CAGR in FY15-17E largely supported by ~11% volume CAGR and limited realisation growth largely on the back of change in product mix Leader in paint segment, economic recovery to drive volume growth APL is the industry leader in the decorative paint segment with ~53% market share and a dealer network of over 35, across India. It derives ~81% of its topline from the decorative segment while the rest comes from the industrial segment. With limited competition in the market, APL recorded revenue CAGR of 1% in FY11-15 driven by volume CAGR of ~8% (amid economic slowdown) during the same period. In spite of inflationary pressure in FY11-15, gross margins expanded ~11 bps clearly indicating APL s pricing power. Slowing Indian GDP growth (paints volume growth is 1.5-1.7x real GDP growth) and a slowdown in discretionary expenditure (slight shift in repainting demand) took a toll on overall volume growth of the paint industry. We believe an economic recovery (albeit at a slow pace) and repainting demand coupled with the new government s focus on increasing spending in infrastructure projects would lead to 11% volume growth (demand staying intact in tier II, tier III cities) and moderate revenue CAGR of 13% between FY15 and FY17E. Moderate raw material price, favourable rupee movement to aid margin To avoid inflationary pressure, APL has successfully passed on the price hike (~6-7%) to its customers. However, the EBITDA margin tapered off in FY12-13 as raw material prices moved up sharply (~4% of raw material are imported) hit by elevated dollar value against the rupee (up 19% between FY11 and FY13) and bottoming out titanium di-oxide (TiO2) prices. In FY15, APL passed on the benefit of lower material cost to its customer by taking a minute price hike of.4% YoY. We have modelled a margin improvement of ~37 bps in FY15-17E (considering historical performance during FY1) supported by benign raw material prices. Strong fundamentals, revival in economy to drive valuation We have revised our revenue estimate downward by 3% and 4% for FY16E and FY17E, respectively, considering passing on benefits of lower raw material prices to customers. We estimate PAT CAGR of ~27% for FY15-17E due to expansion in EBITDA margin by 37 bps in FY15-17E. Historically, during FY1, the company witnessed a sharp increase in gross margin on account of lower crude prices. We believe crude oil prices will remain at lower levels in the medium term, which will benefit market leader as it is least likely to pass on the entire benefit of lower raw material prices. Also, high cash on the books could lead to an increase in dividend payout and improvement in RoEs. We value the stock at 4x its FY17E earnings with a revised target price of 951/share and BUY recommendation. ICICI Securities Ltd Retail Equity Research

Variance analysis Q1FY16 Q1FY16E Q1FY15 YoY (%) Q4FY15 QoQ (%) Comments Revenue 3,578. 3,632.7 3,325.4 7.6 3,49.4 2.5 Net sales witnesses growth of 7.6% on the back of 11% YoY volume growth largely driven by sharp growth in demand of lower end products, while company has taken price cut of ~3% YoY to pass on the benefit of lower raw material price Other Income 73.5 46.7 47.3 55.3 42.4 73.3 Higher other income mainly on account of sale of land at Pondicherry and higher treasury income Raw Material Exp 1,946.1 2,1. 1,93.9.8 1,941.9.2 Employee Exp 247.6 257.9 225.3 9.9 216.4 14.4 Manufacturing & Other exp 746.2 69.2 649.5 14.9 817.5-8.7 Raw material cost to sales dip 368 bps YoY with crude derivative seeing a sharp dip in Q4FY15 EBITDA 683.5 625.3 556.5 22.8 559.2 22.2 EBITDA Margin (%) 18.9 17. 16.6 231 bps 15.8 35 bps Saving in raw material cost helps in expansion of EBITDA margin Depreciation 69.3 84.9 64.6 7.4 67.2 3.2 Interest 8.9 12. 7.8 14.5 1.2-12.6 PBT 678.8 575.2 56.3 34.1 521.8 3.1 Total Tax 211.3 18.6 159. 33. 169.8 24.5 PAT 455.2 383.6 338.7 34.4 341. 33.5 Sharp growth in EBITDA margin coupled with higher other income translates into sharp growth in PAT Key Metrics Volume growth (%) 1.5 11 13 6.5 Volume growth largely driven by sale of lower end products Realisation growth (%) -3. -1.5 5 Realisation dips ~3% YoY as company passes on benefit of lower raw material price Change in estimates ( Crore) FY16E FY17E Old New % Change Old New % Change Comment Revenue 16,387.8 15,877.8-3.1 18,687. 17,952.1 We revise our estimates downward mainly on account of higher contribution of -3.9 lower end products in the sales with price cut to pass on the benefit of lower raw material cost to end customers EBITDA 2,687.6 2,898.9 7.9 3,12.4 3,38.7 8.3 EBITDA Margin % 16.4 18.3 186bps 16.7 18.8 We believe a further expansion in EBITDA margin in FY16E & FY17E can be 213bps attributed to lower input cost as commodity prices are expected to remain benign in the near term PAT 1698.4 1844.2 8.6 1995.4 2258.7 13.2 EPS ( ) 17.7 19.2 8.6 2.8 23.5 13.2 Assumptions Current Earlier Comments FY13 FY14 FY15 FY16E FY17E FY16E FY17E Volume Growth (%) 4.5 6. 9.7 11. 11.3 11. 12. Volume growth largely driven by sustained demand from rural india Realisation Growth (%) 4.8 1.8.3 (1.3) 1.5 2.5 2. ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis Leader in decorative paint segment with over ~53% market share Asian Paints (APL) has remained the industry leader among top four players (i.e. Berger Paints, Kansai Nerolac and Akzo Nobel) with a market share of 53% followed by Berger Paints with ~19% and Kansai Nerolac with ~15%. In spite of competition gaining momentum, in the last six years (28-14), APL s market share has improved 1 bps (in terms of value) supported by a strong dealer network, strong supply chain, brand building exercise and launch of premium products in domestic markets. The company has a strong dealer network of over 35, across India (~27, dealers with tinting machines), which is nearly double India s No. 2 player Berger Paints in the decorative segment. The company has recorded revenue CAGR of 2% in FY5-8 led by ~16% volume growth supported by rising urbanisation, shorter repainting demand and launch of premium products. Leader in decorative paints segment continues to grow at a healthy pace with strong double digit volume growth mainly contributed by decorative paints demand Exhibit 1: Expect volume CAGR of ~11% in FY15-17E 2 15 The volume growth in the paint segment has remained higher than real GDP growth and commands a multiplier of 1.7x (average FY2-8). We have modelled revenue CAGR of 13% in FY15-17E led by 11% volume growth during the same period. Our estimate of volume growth is largely supported by demand remaining intact for decorative paints in tier II and tier III cities coupled with shorter repainting demand that will help in driving volume growth. Exhibit 2: Net sales growth at ~13% CAGR in FY15-17E 2 15 (%) 1 5 ( crore) 1 5-5 FY1 FY11 FY12 FY13E FY14E FY15E FY16E FY17E Volume Growth Realisation growth FY1 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Domestic Overseas Exhibit 3: Market share of leading paint companies (28) Asian Paints 52% Exhibit 4: Market share of leading paint companies (215) Akzo Noble 11% Shalimar Paints 2% Shalimar Paints 4% Akzo Noble 11% Berger Paints 17% Kansai Nerolac 16% Kansai Nerolac 15% Berger Paints 19% Asian Paints 53% ICICI Securities Ltd Retail Equity Research Page 3

Exhibit 5: Stabilising raw material cost (Tio2 Prices) Sharp volume growth with timely price hike offsets inflationary pressure APL s margin movement has been in the range of 15-16% during the bull run of FY5-8 and in FY1, supported by volume CAGR of ~16% and benefit of lower raw material prices [mainly titanium di oxide (TiO2)]. However, APL had not been immune to the economic slowdown and the EBITDA margin in FY9 declined ~4 bps YoY (followed by a sharp gross margin correction of 44 bps) due to a sharp movement in crude oil prices. As majority of the raw material of paint companies is imported (~4% of raw material), an elevated dollar value against rupee and higher TiO2 prices (increased CAGR 11%) in FY11-14 restricted the average EBITDA margin to 15-16% with volume CAGR of ~8% in the same period. Raw material prices have remained benign in the last few years, helping an expansion in gross margin by ~11 bps in FY11-15. We believe crude oil prices will remain subdued in the near term, which will benefit market leader as it is least likely to pass on the entire benefit of lower raw material prices. We have modelled an EBITDA margin improvement of ~37 bps in FY15-17E led by benefit of benign raw material prices (supported by favourable currency movement coupled with stabilising TiO2 prices). Exhibit 6: Regular price hike to help in margin expansion ( /kg) 24 23 22 21 2 19 18 17 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 (%) 22 2 18 16 14 12 1 8 6 4 2.1 17.9 15.7 15.8 15.7 15.8 18.3 18.8 FY1 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Exhibit 7: Fall in commodity prices to drive EBITDA margin by ~37 bps (FY15-17E) ( crore) 4 35 3 25 2 15 1 5 51.8 537.3 485.1 1997.9 556.5 536.2 58.7 559.2 2235.4 683.5 338.7 2898.9 2 18 16 14 12 1 8 6 4 2 Q2FY14 Q3FY14 Q4FY14 (%) FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 FY15 Q1FY16 FY16E FY17E EBITDA ( crore) EBITDA margin (%) ICICI Securities Ltd Retail Equity Research Page 4

Improvement in margin to drive PAT We believe PAT is likely to record a CAGR of 27% in FY15-17E, supported by an improvement in the EBITDA margin. The company has planned a total capex of ~ 7 crore, which includes capacity addition of 2 lakh tonnes in Rohtak plant and new capacity addition in southern India. We believe there would be near term pressure in free cash flows considering the capital outlay. Exhibit 8: PAT likely to grow at 27% CAGR in FY15-17E ( crore) 25 2 15 1 5 2258.7 1844.2 1395.2 1218.8 1113.9 251.1 275.2 326.8 329.4 287.4 338.7 347.3 367.6 455.2 341. Q4FY13 FY13E Q1FY14 Q2FY14 Q3FY14 Q4FY14 FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 FY15E Q1FY16 FY16E FY17E PAT ( crore) PAT Margin (%) 14 12 1 8 6 4 2 (%) Exhibit 9: Lighter balance sheet to help in driving return ratios 6 55 5 45 4 35 3 25 2 15 (%) FY11 FY12 FY13 FY14 FY15E FY16E FY17E RoE RoCE ICICI Securities Ltd Retail Equity Research Page 5

Outlook and valuation As APL is the market leader in the decorative segment with over 57% market share, the company has commanded rich valuations compared to peers in spite of volume pressure and the declining trend of margin and return ratios. The company recorded revenue, PAT CAGR of 19.6%, 33%, respectively, supported by ~16% volume CAGR in FY5-8. Better operating leverage led to EBITDA margin expansion of 2 bps during the same period. The company has commanded an average one year forward earnings multiple of 22x in FY5-8 with average RoE of 39%. For FY11-13, revenue, PAT CAGR was 12%, 1%, respectively, supported by ~7-8% volume growth. Despite an EBITDA margin erosion by ~142 bps due to lower operating leverage (higher fixed cost) and RoE on a declining trend, the stock has commanded average one year forward earnings multiple of 3x. However, we have revised our revenue, estimate downward by 3% and 4%, for FY16E and FY17E, respectively, considering passing on of benefits of lower raw material prices to customers. We estimate PAT CAGR of ~27% for FY15-17E due to expansion in EBITDA margin by 37 bps in FY15-17E. Historically, in FY1 the company witnessed a sharp increase in gross margin on account of lower crude prices. We believe crude oil prices will remain at lower levels in the medium term, which will benefit the market leader as it is least likely to pass on the entire benefit of lower raw material prices. Also, high cash on the books could lead to an increase in dividend payout and improvement in RoEs. We value the stock at 4x its FY17E earnings with a revised target price of 951/share and BUY recommendation. Exhibit 1: Valuation Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY14 12714.8 12.7 64.2 39.9 34. 47.4 FY15E 14182.8 11.5 14.5 14.5 56.1 35.9 32.5 44.9 FY16E 15877.8 12. 19.2 32.2 42.4 27.6 37. 5.9 FY17E 17952.1 13.1 23.5 22.5 34.7 23.5 38.4 51.5 ICICI Securities Ltd Retail Equity Research Page 6

Company snapshot 1, 9 Target Price 951 8 7 6 5 4 3 2 1 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Mar-1 Robust volume growth along with substantial improvement in operating margins ~18% (best in last six seven years) results in a rally in the stock May-1 Commences operations in its new manufacturing facility at Rohtak, Haryana with a capacity of 1,5, kl at an investment of 275 crore Jan-11 Margin decline due to slow & steady inch up of key crude based raw material prices Oct-11 Aggressive price hike to mitigate raw material pressure a respite to the stock price May-12 Starts building a decorative paints plant in Khandala (Maharashtra) with a capacity of ~3,, kl (scalable capacity of 4,, kl) Jan-13 Sustained volumes along with ~2% decline in Titanium dioxide lead to positive movement in the stock Jul-13 Stock witnesses a steep decline in anticipation of adverse impact on results due to a volatile currency movement Nov-13 With sustained volumes and strong margins in Q2FY14 contrary to expectation, the stock recovers and makes new high in November Nov-13 Company closes down operation of its powder coating plant at Baddi (HP) for two years due to a significant decline in the processing volume Feb/14 Unconditional cash offer for shares of Berger International (BIL), Singapore by Asian Paints (International) Ltd (APIL), Mauritius, to make BIL a wholly-owned subsidiary and delist from Singapore Exchange Securities Trading (SGX-ST) Apr/14 Asian Paints (International) Ltd, Mauritius, subsidiary of Asian Paints acquires 51% stake in Kadisco Chemical Industry PLC, Ethiopia May/14 Asian Paints acquires entire stake of Ess Ess Bathroom Products Pvt Ltd, a prominent player in the bath and wash business segment in India Top 1 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Smiti Holding & Trading Company Pvt. Ltd. 31-Mar-15 5.64 54.1. 2 Isis Holding & Trading Company Pvt. Ltd. 31-Mar-15 5.51 52.9. 3 Life Insurance Corporation of India 3-Jun-15 5.37 51.5 4.6 4 Geetanjali Trading & Investments Pvt. Ltd. 31-Mar-15 5.14 49.3. 5 Ojasvi Trading Pvt. Ltd. 3-Jun-15 4.9 47.. 6 Vakil (Abhay Arvind) 31-Mar-15 2.97 28.5. 7 Elcid Investments, Ltd. 31-Mar-15 2.95 28.3. 8 Gujarat Organics Ltd 31-Mar-15 2.38 22.8. 9 Sudhanava Investments & Trading Company Pvt. Ltd. 31-Mar-15 1.98 19.. 1 Rupen Investment & Industries Pvt. Ltd. 31-Mar-15 1.96 18.8. Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Promoter 52.8 52.8 52.8 52.8 52.8 FII 18.3 18.1 17.3 18.1 17. DII 9.2 9.2 9.9 8.8 9.8 Others 19.7 19.9 2.1 2.3 2.4 Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Centaurus Trading & Investments Pvt. Ltd. 59.81m 7.41m British Columbia Investment Management Corp. -12.25m -1.18m Life Insurance Corporation of India 55.13m 4.64m William Blair & Company, L.L.C. -1.74m -.94m Vontobel Asset Management, Inc. 54.56m 3.94m DSP BlackRock Investment Managers Pvt. Ltd. -7.9m -.64m Fidelity Management & Research Company 31.99m 2.59m Neuberger Berman, LLC -4.63m -.48m Vakil (Amrita A) 22.1m 2.57m KBC Fund Management Limited -4.34m -.36m ICICI Securities Ltd Retail Equity Research Page 7

Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15E FY16E FY17E Total Operating Revenue 12,714.8 14,182.8 15,877.8 17,952.1 Growth (%) 15.9 11.5 12. 13.1 Raw Material Expenses 7,34.7 7,971.5 8,59.2 9,84.8 Employee Expenses 759.7 97.1 1,5.1 1,187.1 Marketing Expenses 1,125.4 1,12.4 1,159.9 1,328.8 Administrative Expenses 483.5 434.2 51.6 549.2 Other expenses 1,7.5 1,514.2 1,677.1 1,665.4 Total Operating Expenditure 1,716.9 11,947.4 12,978.8 14,571.3 EBITDA 1,997.9 2,235.4 2,898.9 3,38.7 Growth (%) 15.4 11.9 29.7 16.6 Depreciation 245.7 265.9 311.4 315.7 Interest 42.2 34.8 47.8 47.8 Other Income 134.2 169.7 186.7 224. PBT 1,844.2 2,14.4 2,726.4 3,241.2 Total Tax 571.5 649.5 845.2 939.9 Minority Interest 44. 32.2 37. 42.5 PAT 1,218.8 1,395.2 1,844.2 2,258.7 Growth (%) 9.4 14.5 32.2 22.5 EPS ( ) 12.7 14.5 19.2 23.5 Cash flow statement Crore (Year-end March) FY14 FY15E FY16E FY17E Profit before Tax 1,834.3 2,76.9 2,726.4 3,241.2 Add: Depreciation 255.6 265.9 311.4 315.7 (Inc)/dec in Current Assets -484.9-1,26. -488.7-668. Inc/(dec) in CL and Provisions 316.7 112.1 686.1 417.5 Others -41.6 26.9 45.6 47.8 Tax Paid -48.2-649.5-845.2-939.9 CF from operating activities 1,4. 54.3 2,124.2 2,98.6 (Inc)/dec in Investments -39.3-457.9-45. -45. (Inc)/dec in Fixed Assets -292.5-17.3-568.6-464.3 Others 79.9... CF from investing activities -62.9-565.2-613.6-59.3 Issue/(Buy back) of Equity.... Inc/(dec) in loan funds -36.9-117.4-22.8-22.8 Dividend paid & dividend tax -546.7-585. -1,151. -1,151. Inc/(dec) in Sec. premium.... CF from financing activities -625.9-72.4-1,173.9-1,173.9 Net Cash flow 171.2-727.3 336.7 415.5 Opening Cash 736.7 931.7 24.4 541.1 Closing Cash 931.7 24.4 541.1 956.6 Note: adjusted for FY15E Balance sheet Crore (Year-end March) FY14 FY15E FY16E FY17E Liabilities Share Capital 95.9 95.9 95.9 95.9 Reserve and Surplus 3,943.3 4,646.5 5,339.7 6,447.4 Total Shareholders funds 4,39.2 4,742.4 5,435.6 6,543.3 Long term loans 41.4 78.3 78.3 78.3 Long Term Provisons 18.5 119.7 139.7 159.7 Minority Interest/Other LT liab 445.2 454.9 516.9 584.4 Current Liabilities Creditors 1,745.7 1,548.8 2,89.8 2,362.3 Other CL 1,659.4 1,968.5 2,113.5 2,258.5 Total Liabilities 8,39.4 8,912.5 1,373.7 11,986.4 Assets Gross Block 3,665.7 4,.1 4,65.1 5,2.1 Less: Acc Depreciation 1,245.5 1,511.5 1,822.9 2,138.6 Net Block 2,42.2 2,488.6 2,827.2 3,61.5 Capital WIP 71.6 121.6 371.6 621.6 Non- Current Investments 192.1 385.9 395.9 45.9 LT loans & advances 13.3 278.5 33.5 328.5 Deffered Tax Assets 2.19.2 2.4 2.4 Other Non-current Assets 166.6 282.5 292.5 32.5 Current Assets Inventory 2,69.9 2,258.5 2,525.2 2,854.5 Debtors 1,11.3 1,179.9 1,36.1 1,476.4 Cash & Bank 931.7 24.4 541.1 956.6 Loans & Advances 246.5 262. 217.7 246.1 Other Current Assets 698.2 1,45.5 1,59.5 1,73.5 Total Assets 8,39.4 8,912.5 1,373.7 11,986.5 Key ratios (Year-end March) FY14 FY15E FY16E FY17E Per share data ( ) EPS 12.7 14.5 19.2 23.5 Cash EPS 15.7 17.7 22.9 27.3 BV 42.1 49.4 56.7 68.2 DPS 6.2 6.1 12. 12. Cash Per Share 97.1 21.3 56.4 99.7 Operating Ratios (%) EBITDA Margin 15.7 15.8 18.3 18.8 PBT / Total Operating income 14.6 14.8 17.4 18.3 PAT Margin 9.7 1. 11.8 12.7 Inventory days 59.2 58.1 58. 58. Debtor days 31.8 3.3 3. 3. Creditor days 5. 5. 48. 48. Return Ratios (%) RoE 34. 32.5 37. 38.4 RoCE 47.4 44.9 5.9 51.5 RoIC 36.8 28.8 34.9 36.6 Valuation Ratios (x) P/E 64.2 56.1 42.4 35.8 EV / EBITDA 41. 38. 28.9 25.4 EV / Net Sales 6.2 5.6 5. 4.5 Market Cap / Sales 6.2 5.6 5. 4.6 Price to Book Value 19.4 16.5 14.4 12.3 Solvency Ratios Debt/EBITDA.... Debt / Equity.... Current Ratio 1.2 1.5 1.3 1.4 Quick Ratio.6.8.7.7. ICICI Securities Ltd Retail Equity Research Page 8

ICICIdirect.com coverage universe (Consumable) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E Asian Paints (ASIPAI) 843 951 Buy 8,861 14.5 19.2 23.5 56.1 42.4 34.7 35.9 27.6 23.5 44.9 5.9 51.5 32.5 37. 38.4 Bajaj Electricals (BAJELE) 272 316 Buy 2,713-1.4 12.7 15.7. 21.4 17.3 34.4 11. 9.2 5.6 21.6 22.5-2. 16.3 17.2 Havells India (HAVIND) 299 259 Hold 18,655 6.2 8.8 1.9 48.4 34. 27.5 25.2 19.6 16.2 27.5 33.3 35. 21.2 26.1 27. Kansai Nerolac (GOONER) 258 253 Buy 13,94 5. 15.8 7.9 51.2 16.4 32.7 31.3 29.2 2. 23. 16.2 21.5 17. 35.5 15.5 Pidilite Industries (PIDIND) 552 56 Hold 29,22 1.2 12.4 15.1 57. 45.9 37.7 37.6 29.9 24.3 28.3 32. 35.4 22.6 25.1 27. Essel Propack (ESSPAC) 151 16 Buy 2,372 9. 12. 13.7 16.9 12.6 11. 7.7 6.2 5.5 16.8 2.2 21. 18. 2.6 2.3 Symphony Ltd (SYMCOM) 1,875 3,11 Buy 6,558 4.3 52.4 73.3 46.5 35.8 25.6 35.5 27.1 19.5 52. 54.8 57.9 41.1 43.1 45.7 V-Guard Ind (VGUARD) 912 876 Hold 2,722 23.7 28.2 37.4 38.5 32.4 24.4 23.7 19.8 15.4 22.8 24.4 27.5 18.7 19.2 21.4 Voltas Ltd (VOLTAS) 38 394 Buy 1,187 11.6 13.7 15.6 26.5 22.5 19.7 23.4 17.2 13.9 17.1 19.5 21. 18.3 18.6 18.9 ICICI Securities Ltd Retail Equity Research Page 9

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 1

ANALYST CERTIFICATION We /I, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. 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