Safal Niveshak

Value Investing Made Simple

www.safalniveshak.com

Basic Company Details

(Enter values only in red cells)
Parameters
Company
Industry
Business (As you understand it, in simple words)
Current Stock Price (Rs)
Face Value (Rs)
No. of Shares (Crore)
Market Capitalization (Rs Crore)
Promoter Shareholding (Latest Quarter)
Promoter Pledged Shareholding (Latest Quarter)

Key Financials (Last 10-Years)

Parameters
Sales Growth (10-Year CAGR)
Gross Profit Growth (10-Year CAGR)
Net Profit Growth (10-Year CAGR)
Average Debt/Equity (x)
Average Return on Equity
Note: Asian Paints' analysis in this excel is for representation purpose only.

Warning!

wonderful tool to analyze the past. But it can be a wea

So be very careful of what you are getting into. Here

Details
Asian Paints
Paints
XYZ
4,665
10
10
44,747
###
###

)
Details
20.4%
18.1%
24.4%
0.3
###

Remember!

Focus on decisions, not outcomes. Look for d

Please!

blame me if results of this excel cause you to lose it

thinking, but you alone are responsible for your actions
I am not a sadist who wants you to do the
own. But I'd rather give you a compass instead of a ma
lose it all! All th

Excel can be a
But it can be a weapon of mass destruction to predict the future!
re getting into. Here, garbage in will always equal garbage out.

utcomes. Look for disconfirming evidence. Calculate. Pray!

It's your money. Please don't

cause you to lose it all! I've designed this excel to aid your own
ible for your actions. I want to live peacefully ever after! :-)
wants you to do the hard work by analyzing companies on your
ass instead of a map, for you can confuse map with territory and
lose it all! All the best!

Buffett Che

Parameter

Consumer monopoly or commodity?

Understand how business works

Is the company conservatively financed?

Are earnings strong and do they show an upward trend?

Does the company stick with what it knows?

Has the company been buying back its shares?

Have retained earnings been invested well?

Is the companys return on equity above average?

Is the company free to adjust prices to inflation?

Does the company need to constantly reinvest in capital?

Conclusion

Never Forget

Buffett Checklist - Read, Remember, Follow!

Source - Buffettology by Mary Buffett & David Clark

Explanation

Seek out companies that have no or less competition, either due to a patent or brand name or similar in
companies will typically have high gross and operating profit margins because of their unique niche. Ho
simply highlight companies within industries with traditionally high margins. Thus, look for companies w
industry norms. Also look for strong growth in earnings and high return on equity in the past.

Try to invest in industries where you possess some specialized knowledge (where you work) or can mo
competitive environment (simple products you consume). While it is difficult to construct a quantitative f
should "only" consider analyzing those companies that operate in areas that you can clearly grasp - you
size of the circle, but only over time by learning about new industries. More important than the size of th

Seeks out companies with conservative financing, which equates to a simple, safe balance sheet. Such
need for long-term debt. Look for low debt to equity or low debt-burden ratios. Also seek companies tha
cash flows.

Rising earnings serve as a good catalyst for stock prices. So seek companies with strong, consistent, a
5/10 year earnings per share growth greater than 25% (alongwith safe balance sheets). To help indicate
where the last 3-years earnings growth rate is higher than the last 10-years growth rate. More importan
growth. So exclude companies with volatile earnings growth in the past, even if the "average" growth ha

Like you should stock to your circle of competence, a company should invest its capital only in those bu
difficult factor to screen for on a quantitative level. Before investing in a company, look at the companys
should fit within the primary range of operations for the firm. Be cautious of companies that have been v

Buffett prefers that firms reinvest their earnings within the company, provided that profitable opportunitie
favours shareholder-enhancing maneuvers such as share buybacks. While we do not screen for this fa
if it has a share buyback plan in place.

Seek companies where earnings have risen as retained earnings (earnings after paying dividends) hav
such companies is by looking at those that have had consistent earnings and strong return on equity in

Consider it a positive sign when a company is able to earn above-average (better than competitors) retu
return on equity for Indian companies over the last 10 years is approximately 16%. Thus, seek compan
Again, consistency is the key here.

That's what is called "pricing power". Companies with moat (as seen from other screening metrics as su
debt etc.) are able to adjust prices to inflation without the risk of losing significant volume sales.

Companies that consistently need capital to grow their sales and profits are like bank savings account,
companies that don't need high capital investments consistently. Retained earnings must first go toward
the lower the amount needed to maintain current operations, the better. Here, more than just an absolu
help a lot. Seek companies that consistently generate positive and rising free cash flows.

Sensible investing is always about using folly and discipline - the discipline to identify excellent busine
the value of these businesses to attractive levels. You will have little trouble understanding this philosop
dependent upon your dedication to learn and follow the principles, and apply them to pick stocks succe
Focus on decisions, not outcomes. Look for disconfirming evidence. Pray!

Asian Paints - Balance She

Year / Rs Crore
SOURCES OF FUNDS / EQUITY & LIABILITIES
Share Capital
Reserves & Surplus
Shareholder's Funds / Equity

(Enter values only in red cells)

L-9
L-8
64
413
478

96
434
529

75

70

Non-Current Liabilities
Long-Term Borrowings

197

160

Current Liabilities
Short-Term Borrowings
Trade Payables
Other Current Liabilities
Short-Term Provisions

514
232
177
105

581
9
272
163
136

35
20
5
5
5

34
22
6
1
6

737
322
256
68
55
35

772
12
318
265
70
76
31

Minority Interest

APPLICATION OF FUNDS / ASSETS

Non-Current Assets
Tangible Assets
Intangible Assets
Capital Work-in-Progress
Non-Current Investments
Current Assets
Current Investments
Inventories
Trade Receivables
Cash and Bank Balance
Short-Term Loans and Advances
Other Current Assets

Paints - Balance Sheet

r values only in red cells)

L-7
L-6

L-5

L-4

L-3

L-2

L-1

96
471
567

96
550
646

96
682
778

96
886
982

96
1,107
1,203

96
1,614
1,710

96
2,092
2,187

96
2,653
2,749

64

60

60

57

76

94

110

137

240

261

180

179

152

104

147

148

618
295
206
117

705
330
249
126

979
126
449
339
66

1,248
96
572
414
166

2,517
157
554
461
1,345

3,315
125
718
661
1,810

2,081
1,087
703
290

2,771
1,297
1,107
367

37
24
6
1
6

41
27
7
1
7

45
29
7
1
7

49
32
8
1
8

54
35
9
1
9

59
39
10
1
10

65
43
11
1
11

72
47
12
1
12

950
27
455
296
61
80
32

1,120
75
489
348
73
74
61

1,406
114
598
421
105
98
69

1,692
198
714
460
111
153
56

2,966
769
572
210
1,365
50

3,871
532
956
543
106
1,670
65

3,068
367
1,305
573
626
106
90

3,560
285
1,599
781
624
186
84

Asian Paints - P&L Account

Year / Rs Crore
Net Sales

L-9
1,817

Expenditure
Increase/Decrease in Stock
Raw Material Consumed
Employee Cost
Other Manufacturing Expenses
General and Administration Expenses
Selling and Distribution Expenses
Miscellaneous Expenses
Total Expenditure
Gross Profit
Operating Profit / EBITDA
Other Income
Depreciation
Profit Before Interest & Tax (PBIT)
Interest
Exceptional Income / Expenses
Profit Before Tax
Provision for Tax
Profit After Tax
Minority Interest
Share of Associate
Consolidated Profit After Tax (PAT)
Diluted EPS (Rs)
Interim Equity Dividend
Proposed Equity Dividend
Total Equity Dividend

(38)
975
120
66
60
301
56
1,540
815
278
11
49
240
14
226
86
140
(1)
139
14.5
29
42
70

(Enter values only in red cells)

L-8
L-7
2,373
2,574

2
1,290
183
74
84
358
85
2,076
1,007
297
27
71
253
15
238
94
144
(3)
4
145
15.1
34
48
82

(61)
1,563
199
86
87
297
68
2,239
985
335
32
69
298
11
287
106
181
(7)
0
174
18.1
38
53
91

nts - P&L Account

ues only in red cells)

L-6
3,021

L-5
3,670

L-4
4,407

L-3
5,464

L-2
6,681

L-1
7,722

L
9,632

(10)
1,803
219
96
99
345
79
2,630
1,133
391
32
68
354
11
343
132
211
2
(1)
212
22.1
67
53
120

(70)
2,269
257
112
122
411
85
3,187
1,358
483
40
61
462
24
(8)
430
147
283
(2)
(0)
281
29.3
115
10
125

(36)
2,613
301
122
145
535
63
3,743
1,708
664
60
59
665
26
(7)
631
203
428
(19)
409
42.7
62
101
163

(27)
2,866
365
682
167
646
91
4,790
1,943
674
51
74
651
32
(1)
617
197
419
(22)
398
41.5
62
106
168

(102)
3,227
433
797
200
801
89
5,445
2,758
1,236
141
84
1,293
37
1
1,257
373
884
(48)
836
87.1
82
177
259

(151)
3,906
454
922
206
969
85
6,391
3,045
1,331
68
113
1,286
26
1,260
378
881
(38)
843
87.9
82
225
307

(173)
5,099
526
1,073
269
1,207
120
8,122
3,633
1,510
108
121
1,497
43
1,454
434
1,021
(32)
989
103.1
91
293
384

CAGR
20.4%

20.3%
18.1%
20.7%

22.6%

23.0%
24.7%

24.4%

20.8%

Asian Paints - Cash Flow Sta

Year / Rs Crore
Net cash (used in) / generated from operating activities
Payment for purchase of fixed assets
Free Cash Flow
Net cash (used in) / generated from investing activities
Net cash (used in) / generated from financing activities
Net increase in cash and cash equivalents

(Enter values only in red cells

L-9
154
(40)
114
(70)
(59)
24

Sample Cash Flow

MINUS

s - Cash Flow Statement

values only in red cells)

L-8
L-7
249
111
(44)
(97)
205
14
(113)
(74)
(134)
(42)
2
(5)

L-6
179
(87)
92
(125)
(42)
12

L-5
258
(82)
176
(109)
(111)
38

L-4
480
(308)
172
(335)
(134)
11

L-3
389
(310)
79
(270)
(230)
(111)

ample Cash Flow Statement (from Annual Report)

L-2
1,063
(395)
668
(299)
(332)
432

L-1
762
(156)
606
(440)
(334)
(12)

L
826
(673)
153
(512)
(327)
(12)

Remember!
Cash flow, not reported earnings, is what determines a company's
long-term value.

termines a company's

Asian Paints - Key Ratios

(Don't touch any cell on this sheet, as all are calculated figu

Operational & Financial Ratios

Diluted Earnings Per Share (Rs)
Diluted Book Value Per Share (Rs)
Tax Rate (%)
Dividend Per Share (Rs)
Dividend Pay Out Ratio (%)

L-9
14.5
49.8
38%
7.3
50%

L-8
15.1
55.2
40%
8.5
56%

L-7
18.1
59.1
37%
9.5
52%

L-6
22.1
67.4
39%
12.5
57%

Profitability Ratios
Gross Margin (%)
EBITDA Margin (%)
EBIT Margin (%)
Net Profit Margin (%)

L-9
45%
15%
13%
8%

L-8
42%
13%
11%
6%

L-7
38%
13%
12%
7%

L-6
38%
13%
12%
7%

Performance Ratios
Return on Equity (%)
Return on Capital Employed (%)
Return on Invested Capital (%)
Sales/Working Capital (x)

L-9
29%
60%
24%
8.2

L-8
27%
70%
25%
12.4

L-7
31%
52%
26%
7.8

L-6
33%
49%
29%
7.3

Efficiency Ratios
Receivable Days
Inventory Days
Payable Days

L-9
51
65
47

L-8
41
49
42

L-7
42
64
42

L-6
42
59
40

Growth Ratios
Net Sales Growth (%)
EBITDA Growth (%)
PBIT Growth (%)
PAT Growth (%)

L-9

L-8
31%
7%
6%
4%

L-7
8%
13%
18%
20%

L-6
17%
17%
19%
22%

L-9
0.4
1.7
1.4
0.8
17.5

L-8
0.3
0.8
1.3
0.8
16.6

L-7
0.4
16.7
1.5
0.8
27.5

L-6
0.4
2.8
1.6
0.9
31.0

Financial Stability Ratios

Total Debt/Equity (x)
Debt Burden (x)
Current Ratio (x)
Quick Ratio (x)
Interest Cover (x)

Key Ratios

, as all are calculated figures)

L-5
29.3
81.1
34%
13.0
44%

L-4
42.7
102.4
32%
17.0
40%

L-3
41.5
125.4
32%
17.5
42%

L-2
87.1
178.3
30%
27.0
31%

L-1
87.9
228.0
30%
32.0
36%

L
103.1
286.5
30%
40.0
39%

L-5
37%
13%
13%
8%

L-4
39%
15%
15%
9%

L-3
36%
12%
12%
7%

L-2
41%
18%
19%
13%

L-1
39%
17%
17%
11%

L
38%
16%
16%
10%

L-5
36%
66%
35%
8.6

L-4
42%
93%
47%
9.9

L-3
33%
90%
34%
12.2

L-2
49%
150%
70%
12.0

L-1
39%
86%
67%
7.8

L
36%
124%
53%
12.2

L-5
42
59
45

L-4
38
59
47

L-3
38
51
37

L-2
30
52
39

L-1
27
62
51

L
30
61
49

L-5
21%
24%
30%
32%

L-4
20%
37%
44%
46%

L-3
24%
1%
-2%
-3%

L-2
22%
83%
99%
110%

L-1
16%
8%
-1%
1%

L
25%
13%
16%
17%

L-5
0.4
1.0
1.4
0.8
19.3

L-4
0.3
1.0
1.4
0.8
25.2

L-3
0.3
1.9
1.2
0.9
20.0

L-2
0.1
0.2
1.2
0.9
35.2

L-1
0.1
0.2
1.5
0.8
49.5

L
0.1
1.0
1.3
0.7
34.5

Remember!

What counts in
the long run is the increase in "per share value", not overall
growth or size of a business.

Remember!
Gross margins suggest pricing power. Higher = Better, but
also invites competition. So watch out for consistency.

Remember!

ROE = Efficiency
in allocating capital, which is a CEO's #1 job. Higher = Better.
Look for consistency.

Asian Paints: 2-Stage DCF

Figures in Rs Crore | Enter values only in red cells
Initial Cash Flow

476

Years
FCF Growth Rate
Discount Rate
Terminal Growth Rate
Shares Outstanding (Crore)
Net Debt Level
Year
1
2
3
4
5
6
7
8
9
10

1-5
15%
12%
2%
10
(762)
FCF
547
629
724
832
957
1,072
1,200
1,345
1,506
1,687

Final Calculations
Terminal Year
PV of Year 1-10 Cash Flows
Terminal Value
Total PV of Cash Flows
Number of Shares
DCF Value / Share (Rs)

6-10
12%

1,720
5,292
5,539
10,831
10
1,209

Growth
15%
15%
15%
15%
15%
12%
12%
12%
12%
12%

Why DCF?

value of a business is simply the present

of cash that investors can take out of t
business over its lifetime.

Present Value
489
502
515
529
543
543
543
543
543
543

The
siness is simply the present value
at investors can take out of the
siness over its lifetime.

Asian Paints - Buffett Valuation Spreadsheet

Source - Buffettology by Mary Buffett & David Clark | (Enter values only i
Date of Analysis: 15/Nov/15
Current Stock Data
Price:
4,665.0
EPS:
103.1
DPS:
40.0
BVPS:
286.5
P/E:
45.3
Earnings Yield:
2.2%
Dividend Yield:
0.9%
P/BV:
16.3
Govt. Bond Yield:

8.0%

Historical Company Data

Year
L-9
L-8
L-7
L-6
L-5
L-4
L-3
L-2
L-1
L

EPS
14.5
15.1
18.1
22.1
29.3
42.7
41.5
87.1
87.9
103.1

DPS
7.3
8.5
9.5
12.5
13.0
17.0
17.5
27.0
32.0
40.0

BVPS
49.8
55.2
59.1
67.4
81.1
102.4
125.4
178.3
228.0
286.5

Price
High
324
361
471
862
972
1,316
1,264
2,545
3,017
3,762

Annually Compounded Rates of Growth

Factor
10-Year Growth
5-Year Growth

EPS
24.4%
28.6%

DPS
20.8%
25.2%

BVPS
High Price
21.5%
31.3%
28.7%
31.1%

Projected Company Data Using Historical Earnings Growth Rate

Year
L (Current)
L+1
L+2
L+3

EPS

DPS
103.1
128.2
159.4
198.2

46.2
57.5
71.4
88.8

911.5
1,896.4
23,170

L+4
L+5
L+6
L+7
L+8
L+9
L+10

246.5
306.5
381.2
474.0
589.5
733.0
911.5

110.5
137.4
170.8
212.5
264.2
328.5
408.5

25,066
18.3%

Projected Company Data Using Sustainable Growth Rate

Year
L (Current)
L+1
L+2
L+3
L+4
L+5
L+6
L+7
L+8
L+9
L+10

BVPS
286.5
342.6
409.5
489.6
585.2
699.6
836.4
999.9
1,195.3
1,429.0
1,708.3

EPS
101.5
121.3
145.1
173.4
207.3
247.8
296.3
354.2
423.4
506.2
605.2

DPS
45.5
54.4
65.0
77.7
92.9
111.1
132.8
158.8
189.8
226.9
271.2

605.2
1,426.1
15,383
16,809
13.7%

aluation Spreadsheet

d Clark | (Enter values only in red cells)

10-Year Averages
Return on Equity: 35.4%
Payout Ratio: 44.8%
P/E Ratio-High: 30.6
P/E Ratio-Low: 20.3
P/E Ratio: 25.4
Sustainable Growth 19.5%

Price
Low
221
225
327
449
683
1,043
715
1,640
2,040
2,802

P/E Ratio
High
Low
22.4
15.2
23.9
14.9
26.0
18.0
39.0
20.3
33.2
23.3
30.8
24.4
30.5
17.2
29.2
18.8
34.3
23.2
36.5
27.2

Low Price
32.6%
32.6%

Earnings after 10 years

Sum of dividends paid over 10 years
Projected price (Average P/E * EPS)

ROE
29.1%
27.4%
30.7%
32.8%
36.1%
41.7%
33.1%
48.9%
38.5%
36.0%

Payout Ratio
50.5%
56.3%
52.3%
56.5%
44.4%
39.8%
42.2%
31.0%
36.4%
38.8%

Total gain (Projected Price + Dividends)

Projected return using historical EPS growth rate
[(Total Gain / Current Price) ^ (1/10)] - 1

Earnings after 10 years (BVPS * ROE)

Sum of dividends paid over 10 years
Projected price (Average P/E * EPS)
Total gain (Projected Price + Dividends)
Projected return using sustainable growth rate

Warning!

Past is no predictor of
the future. So be careful using numbers in this sheet - that are
based on past numbers - into your fair value calculations. Of
course past can give some indications of the future, but the future
is never always the same.

Asian Paints - Fair Value Calculation

Year
Diluted EPS (Rs)
Stock Price - High (Rs)
High P/E (x)
Stock Price - Low (Rs)
Low P/E (x)
Average P/E (x)

L-9
14.5
324
22.4
221
15.2
18.8

Valuation - Different Methods (Rs)

Graham Number
Avg P/E Ratio Valuation

773
2,356

EPV
DCF
Historical Earnings Growth
Sustainable Earnings Growth

859
1,209
7,460
4,953

Fair Value Range (Rs/Share)

High End
Low End
Margin of Safety (MoS)
Fair Value after MoS
Current Mkt. Price (CMP, Rs)
Premium / (Discount)

2,935
1,578
50%
1,128
4,665
313.5%

(Enter values only in red cells)

L-8
L-7
L-6
L-5
15.1
18.1
22.1
29.3
361
471
862
972
23.9
26.0
39.0
33.2
225
327
449
683
14.9
18.0
20.3
23.3
19.4
22.0
29.6
28.2

Rememb

importance to a s
questions - (1) Is

Don't try to quantif

more simple, sen

Also, your calcula

savings just bec
Focus on d

Calculation

cells)
L-4
42.7
1,316
30.8
1,043
24.4
27.6

L-3
41.5
1,264
30.5
715
17.2
23.9

L-2
87.1
2,545
29.2
1,640
18.8
24.0

L-1
87.9
3,017
34.3
2,040
23.2
28.8

L
103.1
3,762
36.5
2,802
27.2
31.8

Remember!

Give
importance to a stock's fair value only "after" you have answered in "Yes" to these two
questions - (1) Is this business simple to be understood? and (2) Can I understand this
business?
Don't try to quantify everything. In stock research, the less non-mathematical you are, the
more simple, sensible, and useful will be your analysis and results. Great analysis is
generally "back-of-the-envelope".
Also, your calculated "fair value" will be proven wrong in the future, so don't invest your
savings just because you fall in love with it. Don't look for perfection. It is overrated.
Focus on decisions, not outcomes. Look for disconfirming evidence. Pray!