Kansai Nerolac Paints Ltd. share price target

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...

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...

Sales revival in decorative segment post easing of restrictions After a washout April 2020 due to lockdown, KNPL saw a demand revival in decorative paint category in May-June 2020 with double digit volume growth. Strong volume traction in decorative segment was led by repainting/maintenance related demand from tier II/III/IV cities. However, industrial paint volume offtake continued to be under pressure in Q1FY21 on lower demand from key clients. While intermediary lockdowns may delay recovery process in near term, gradual unlocking of economy would help...

54% volume decline in 1Q and gradual recovery in Industrial paints demand paints given success of its economy segment product soldier, higher dependence on tier2/3 cities and low base from 2Q (Lockdown in Kashmir last year, 60-70% market share). Although recovery in auto paints will be gradual...

KNPL's industrial segment remains a drag for the company with volume degrowth of 19% in FY20. However, the company is gradually increasing its focus towards non-automotive segments (~30% of Industrial paints) such as performance & powder coatings to offset revenue loss from automotive segments. On the decorative front (volume growth of ~5% in FY20), KNPL launched the lower end of emulsions in the domestic markets, which received a good response from customers (Soldier' brand recorded ~18% growth in FY20). We believe a good performance of the non-automotive segment (with market share gains) and a gradual recovery in demand for...