Kansai Nerolac Paints Ltd. share price target

to 1) Increased pressure on GRM's due to significant input cost inflation and 2) semiconductor shortage led impact on auto sales may last upto 1 year. We are reducing our Gross margin estimate by 260bps in FY22 with gradual...

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We are increasing our FY22/23 EPS estimates by 2.2%/0.9% mainly due to 1) Recovery in decorative paints since June21 2) Improved mix in decorative segment 3) Encouraging pickup in new business which account for 10% of revenues and 4) Improved performance expected in Industrial segment on a favorable base. However, we reduce our Gross margin estimate by 30bps as...

Kansai Nerolac (KNPL) result was below our estimates due to higher than expected raw material cost pressure. Business recovery remained strong driven by resilient volume growth and price hikes (driven by input cost pressure). In international market; KNPL improved operating profit margins in Nepal and Bangladesh while reduced EBITDA loss in Srilanka during FY21. Raw material cost inflation remained a major concern. However, KNPL has been able to take price hike in decorative (by 2.5%) and industrial coatings (by 3-4%) businesses to offset inflation. Management expects raw material cost to subside due to tepid demand. Positively, KNPL introduced entire range of...

Strong balance sheet to navigate short-term challenges Kansai is the third largest decorative paint players with organised market share of ~10%. While the sales recovery was 95% in FY21, the EBITDA margin of the company increased 200 bps YoY at ~18%. This has helped in a ~100% bottomline recovery for the company in FY21. On the balance sheet front, Kansai maintained its debt free status with net cash balance of | 650 crore. We believe the company's strong balance sheet, supported by...

KNPL expects gradual demand recovery post Covid-19 stabilizes, focus on market share gains across segments. We cut our FY22/23 EPS estimates by 22.7%/5.1% mainly due to twin impacts of 1) Lower gross margins due to 13-14% input cost inflation and 2) Demand impact due to localized lockdowns and wide spread impact of Covid 19 in...

Kansai's Q3FY21 performance was ahead of our estimate with overall volume growth coming in at ~20% YoY (vs. I-direct estimate: 15%). Though on a low base, industrial paint segment volume growth at ~19% (I-direct estimate) was led by strong demand revival in automotive industry. On the decorative front, volume growth at ~21% YoY was supported by strong festive demand from rural and semi urban regions. Also, opening up of metro and tier 1 cities aided volume growth during the period. According to the management, KNL is going to continuously focus on launching new...

2020 will go down in the history as one of the most turbulent years which saw +50mn COVID-19 infections worldwide and unprecedented scale of economic damage and stimulus announced by various countries globally. Markets have seen nervous times before a recovery and unlock started to materialize. Indian recovery has been led by sharp upsurge in rural demand as benefits of higher crop prices as normal monsoons benefit 60% of population. We remain positive and believe that the current uptick could be the start of next multi- year cycle. Our Picks of 2018 have given 29.5% returns in the past 2 years while last year's picks have given 12% return in a volatile environment while our Model portfolio has given ~25% return with 8% NIFTY...

Kansai Nerolac (KNPL) result was above expectation led by high double digit volume growth in decorative coatings. While, Industrial coatings business declined in Jul-Aug'20 but it witnessed growth in Sept'20 led by strong recovery in passenger vehicle and tractors. In International business, Nepal and Srilanka continued to face COVID related growth headwinds while Bangladesh reported high double digit growth. Benign raw material cost supported gross margin expansion for the 5th consecutive quarter. Strict control over cost aided EBITDA margin expansion. Based on revised business outlook; we have upgraded our EPS estimate for FY21-22E by 4-5%. Also, we have introduced...

Revenues grew 4.3% YoY to Rs 13.8bn in Q2FY21, in line with market leader. Positive growth in Q2 after double digit decline of 60% in Q1 was encouraging. Growth from smaller towns outpaced metros/tier 1. The decorative business witnessed double digit volume growth (~+15%) during the quarter- strong performance as APL reported similar improvement. However, industrial sales continued to remain under pressure, and saw gradual recovery in September'20. As RM costs were lower due to fall in crude oil derivatives, GM expanded...