Accumulate Kansai Nerolac Paints; target of Rs 486: Prabhudas Lilladher

Prabhudas Lilladher's research report on Kansai Nerolac Paints

Kansai has given steady outlook with 1) growth bounce back in decorative segment 2) strong volume growth in auto segment and 3) focus on premium powder coatings. We believe Kansai is making right moves 1) 14 new products in decorative segment including Excel Everlast, Mica marble and Impression Kashmir 2) expanding product range in waterproofing & adhesives 3) focus on premium finishes and 4) focus on emerging segments in EV, Premium Appliances, New ancillary products, Alloy wheels and Railways. Kansai seems cognizant of expected increase in competitive intensity post entry of Grasim, but expects new entrants to grow market and gain share from smaller players. We expect margins improvement to continue as higher cost inventory has been mostly used and demand environment has been steady. We estimate 330bps margin expansion and 38.6% PAT CAGR over FY23-25 on a depleted base.

Outlook

We value the stock at 30xFY25 EPS assigning a TP of Rs 486 (Rs485, 30x Dec24 earlier). Incremental market share loss and increasing competition from Grasim/JSW and JK Cement remains a key risk to our call. Accumulate.