Kansai Nerolac Paints - Q4FY13 Result Update - SPA

Kansai Nerolac Paints (KNP) Q4FY13 performance came below our expectations. Company reported sales growth of 3% YoY in Q4FY13 to INR 6,842mn. EBIDTA margin expanded by 12bps on the back of softening in RM cost. PAT at INR 1,227mn was up 173% YoY in Q4FY13 on the back of one time gain due to change in depreciation policy. Adjusting for the same, PAT registered de-growth of 11% YoY.

For the full year, the company registered sales of INR 28,566mn (up 10% YoY) and adj. PAT of INR 1,995 (down 8% YoY). Going ahead, we expect improvement in economic growth would heal demand environment while falling trend in key RM cost would aid margin expansion.

We have rolled the earning multiple over FY15 and arrived at 2 years target price of INR 1,058 (20x FY15E EPS). However, on the back of ~10% downside from CMP to our target price, we downgrade the stock from HOLD to SELL.

Source : Equity Bulls

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