Result Update: Kansai Nerolac Paints Ltd - ACCUMULATE - TP Rs.430 - Kotak

Low double digit volume growth in the decorative paint segment and flattish volumes in the industrial segment translated into revenue of Rs 9.41 bn (-6% QoQ and +5.5% YoY).Operating profit was reported at Rs 1.64 bn with OPM of 17.4% (-60 bps QoQ and +250 bps YoY). The sequential drop in margins is primarily due to increase in raw material prices in Q4FY17 (co took average price hike of 3% from March 1st 2017).Consequently PAT was reported at Rs 1.16 bn vs. our expectation of Rs 1.27 bn. Going forward, we maintain demand momentum to remain strong on stable macro environment and favourable demographics. Raw Material prices have also decreased since the last 2 months which would aid margins. For KNPL, we estimate ~9% volume CAGR over FY17 - FY19E with stable margins and ROE of ~23% and ROCE of ~34% for FY19. Continue to value the stock at 37x FY19E with an unchanged TP of Rs 430 and ACCUMULATE rating (from BUY) maintaining our positive stance on the paint sector.

Shares of KANSAI NEROLAC PAINTS LTD. was last trading in BSE at Rs.405.1 as compared to the previous close of Rs. 405.6. The total number of shares traded during the day was 13568 in over 407 trades.

The stock hit an intraday high of Rs. 409 and intraday low of 405. The net turnover during the day was Rs. 5517250.

Source : Equity Bulls

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