Kansai Nerolac Paints Ltd. share price target

We expect competition intensity is likely to persist in the short term, however, the demand scenario may pick up due to better forecasts on monsoon and moderation in inflation, which may drive the decorative demand....

loyalty and influencer program and new innovations and launches. positive Outlook in non-auto industrials remains positive led by strong order pipeline across Infra, Railways, Powder coatings etc. Competitive intensity remains intense in decorative segment as full impact of new players like Birla Opus, JK Maxx and JSW is yet to play out fully. However, margins are likely to improve in FY26 given benign input costs. We estimate a CAGR of 6.7% in sales and 11% IN PAT over FY25-27. We value the stock at 28xMar27 EPS (No change) and assign a target price of Rs284 (Rs288 earlier)....

Industrial business would be key growth driver with auto to focus on business expansion through new business segments. We attended the Kansai India business strategy call (Part of Kansai Paint...

Kansai Nerolac Paints’ promoter company, Kansai Paint Co., Ltd., Japan, hosted an investors’ meet to discuss their India market strategy under the new management. The management discussed their shorter-term (3 years) and longer-term (till 2030) business strategy in detail.

Considering macro headwinds like erratic rainfall and shift of festive season to Q3FY24, we reckon Kansai has reported healthy numbers in Q2FY24. We remain enthused by the continued investments to strengthen competitive advantages with (1) higher feet-on-street, (2) new product launches, (3) influencer outreach, (4) investments in projects business, and (5) digital.

Kansai has introduced multiple DCF-accretive initiatives under the leadership of Mr. Anuj Jain, MD such as (1) steady expansion of innovative product portfolio across sub-segments, (2) relaunched brand as ‘Nerolac Paint+ with Japanese technology’ supported by higher brand and R&D spends, (3) investments in projects, Next-gen painting services and influencer reach to connect with customers and generate pipeline.

Kansai reported revenue growth of +5.1% compared to Asian Paints (+7%) and Akzo (+6.6%) YoY. Its EBITDA margin expansion (+294bps) was also lower than Asian Paints (+537bps) and Akzo (+331bps) YoY. While Kansai is biggest beneficiary of revival in Automotive sector, it has likely lost market shares decorative paints in our view.

Kansai reported strong Q4FY23 led by (1) price hikes in industrial paints, (2) benefits of investments in trade and projects business in FY23, (3) strong volume growth in automotive paints, (4) correction in input prices and (5) favorable base.