Q3FY21 Result Update - Kansai Nerolac Paints - ICICI Direct

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 products in the decorative categories (that includes construction chemicals that is growing strongly on a relatively low base) and addition of dealer network (the company has ~27500 dealer network vs. 70,000 dealer network of industry leader). This, along with revival in industrial paint demand led by automotive industry (especially in tractor and passenger vehicle sales) and continuous demand from non-auto industry (like consumer durables, etc) would help overall volume growth for company, going forward. We model volume CAGR of ~12% for the company in FY20-23E.

Valuation & Outlook

Kansai is India's third largest decorative paint player with a market share of ~12%. We believe revenue, PAT will grow at CAGR of ~13%, 15%, respectively, in FY20-23E. We value the company at 45xFY23E earnings (i.e. ~20% discount to leader) and reiterate our BUY recommendation on the stock with a revised target price of Rs. 675 (earlier TP Rs. 605).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_KansaiNerolac_Q3FY21.pdf

Shares of KANSAI NEROLAC PAINTS LTD. was last trading in BSE at Rs.574.65 as compared to the previous close of Rs. 577.4. The total number of shares traded during the day was 75963 in over 1852 trades.

The stock hit an intraday high of Rs. 590.1 and intraday low of 562.4. The net turnover during the day was Rs. 44179176.

Source : Equity Bulls

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