Result Update: Kansai Nerolac Paints Ltd - BUY - TP Rs.515 - Kotak

Double digit volume growth in the decorative paint segment as well as the auto segment has translated into revenue of Rs 11.74 bn (+12% YoY and +24% QoQ) for KNPL for the quarter. Lower crude prices kept the raw material situation benign with the company reporting healthy EBIDTA of Rs 2.06 bn (highest ever) and EBIDTA margin of 17.5 % (+10 bps QoQ and -30 bps YoY).Consequently PAT was reported at Rs 1.39 bn (vs. our expectation of Rs 1.41 bn). We expect the performance of paint companies to improve further in Q2FY18. We increase FY19E earnings by 2% and increase the target multiple for KNPL with strong demand environment in decorative segment, benign raw material situation, strong automotive demand and government steps for the real estate and infra sector. Recommend BUY (from Accumulate) with a TP of Rs 515 at 43x FY19E (from 37x) maintaining our positive stance on the paint sector.

Shares of KANSAI NEROLAC PAINTS LTD. was last trading in BSE at Rs.449.9 as compared to the previous close of Rs. 447.3. The total number of shares traded during the day was 13061 in over 523 trades.

The stock hit an intraday high of Rs. 457.85 and intraday low of 445. The net turnover during the day was Rs. 5916880.

Source : Equity Bulls

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