Buy Kansai Nerolac Paints - Kotak

KNPL is the market leader in Industrial paint segment (~ 44% market share) & third in decorative paint segment (~15% market share). With favourable demographic factors, rising income, improving automotive demand (over FY14 to FY16E) and aggressive push in the decorative segment, we believe the company is well placed structurally for healthy long term growth. Slowing economy, stiff competition and rise in input cost moderated the growth and return ratios for the company over the past 2 years. However, we estimate profitability of KNPL to grow at a CAGR of 18% over FY14 to FY16E at Rs 2.55 bn in FY15E (EPS of Rs 47.4) and at Rs 3.10 bn in FY16E (EPS of Rs 57.6). At CMP of Rs 1063 the stock trades at 18.5 times FY16E. We initiate coverage on Kansai Nerolac Paints (KNPL) with a BUY rating and TP of Rs 1270.

Source : Equity Bulls

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