May 20, 2005

Evaluating asian paints

asian paints has been the no.1 paints company for the last 20+ years. This company has returned almost 24% p.a returns since its IPO. Are these returns sustainable ?

Even if the level of returns may not be , i have always felt the company has strong and sustainable competitive advantages like

- A strong distribution network with lockin at key retail dealers through their color world package
- Strong brands in the paints industry like apcolite, apex, gattu etc
- economies of scale in manufacturing, adverstising distribution due to the high market shares (40 %+ )
- good pricing power as the company has been able to sustain margins inspite of raw material price increases
- good management - evident through the track record of managing low WCAP, low debt, sensible accquisitions and good brands and products

In the medium to long term the company should continue to do well in india. The challenge for the company is to port these strengths to their internation operations. That seems to be happening for the time being

1 comment:

Jaysaint said...

Its a great campany and one must stay invested in the company to get good returns. It has consistently added to shareholder wealth.

keep invested

Jayguru