Kansai Nerolac Paints - Q2FY21 Result Update - ICICI Direct

Kansai Nerolac reported a strong performance with ~15% YoY growth in decorative paint volumes in Q2FY21. The strong volume growth is attributable to intact demand from semi urban and rural regions along with continuous dealer additions (grew 4-5% in Q2FTY21). Further, demand for premium range of emulsions witnessed a strong recovery with the opening up of metro and tier 1 regions. The decorative segment value growth at 7% YoY was largely led by a change in product mix and dealer discount policies. On the industrial paint segment, while July-August witnessed a gradual recovery, the company witnessed strong demand in September 2020 led by automotive segments. On the margin front, gross margin was up ~90 bps YoY largely tracking benign raw material prices. Also ~275 bps YoY saving in other costs helped drive EBITDA margin up by ~300 bps YoY to 20%. Finally, while PBT grew 17% YoY, PAT de-growth of 18% YoY was largely on account of tax reversal benefit in the base period. We introduce FY23 estimates, with revenue earning CAGR of ~13% and 12%, respectively, supported by ~11% of volume growth in FY20-23E.

Valuation & Outlook

We believe reopening of metro, tier 1 cities along with recovery in automotive industry would help drive volume for the company, going forward. We introduce FY23E estimates with revenue, earnings CAGR of 13%, 12% respectively. We roll over our valuation on FY23E and reiterate our BUY recommendation on the stock with a revised target price of Rs. 605.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_KansaiNerolac_Q2FY21.pdf

Shares of KANSAI NEROLAC PAINTS LTD. was last trading in BSE at Rs.521.95 as compared to the previous close of Rs. 507.35. The total number of shares traded during the day was 16022 in over 1206 trades.

The stock hit an intraday high of Rs. 523 and intraday low of 494.45. The net turnover during the day was Rs. 8228453.

Source : Equity Bulls

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