Prabhudas Lilladher has given Buy recommendation for Kansai Nerolac Paints with a target price of Rs. 651 in its research report issued on Feb 04, 2022

Prabhudas Lilladher’s research report on Kansai Nerolac Paints

We are cutting our FY22/23/24 EPS estimates by 11.7/9.4/7.9% on mainly due to 1) road to margin recovery might be longer than anticipated on sustained input cost inflation and carry over inventory 2) slower decorative growth in tier2/3 where Kansai has stronger presence leading to sustained loss of market share. 3Q results had one time gain of Rs369mn (reversal of trade deposits on Tinting machines) excluding which EBIDTA margin declined 20Bps QoQ with 47% decline in Adj PAT. We expect volumes to recover led by 1) gradual recovery in decorative paints demand in Tier2/3 cities 2) resolution of semiconductor issue in Automobiles and 3) rising consumer acceptance in construction chemicals, adhesive and wood coatings and 4) Industrial paints innovations in powder coatings (appliances), infra coatings, metros, rebar and Industrial applications.


We now estimate GM to recover from 31.1% in FY22 to 35.5% by FY24. We estimate PAT CAGR of 37.5% over FY21-24 and value the stock at 42xFY24 EPS assigning a TP of Rs651 (Rs707 earlier). Sustained decorative market share loss and aggressive decorative entry by Grasim are key risks to our call. Retain Buy.

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At 14:15 hrs Kansai Nerolac Paints was quoting at Rs 524.30, down Rs 9.95, or 1.86 percent.

It has touched an intraday high of Rs 537.50 and an intraday low of Rs 523.65.

It was trading with volumes of 6,858 shares, compared to its thirty day average of 26,264 shares, a decrease of -73.89 percent.

In the previous trading session, the share closed down 1.28 percent or Rs 6.95 at Rs 534.25.

The share touched its 52-week high Rs 674.15 and 52-week low Rs 521.75 on 06 October, 2021 and 26 October, 2021, respectively.

Currently, it is trading 22.23 percent below its 52-week high and 0.49 percent above its 52-week low.

Market capitalisation stands at Rs 28,255.56 crore.

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