Buy Akzo Nobel India; target of Rs 1706: CD Equisearch

CD Equisearch's Research Report on Akzo Nobel India (ANIL)

"Akzo Nobel India Ltd. (ANIL) manufactures and markets a wide range of coatings covering decorative paints, performance coatings and specialty chemicals, having its registered office in Kolkata, India. The company's product portfolio includes marquee brands such as Dulux, Sikkens, International and Interpon.ANIL reported revenue and PAT of Rs 687 cr and 51 cr respectively in Q3FY15 as compared to revenue and PAT of Rs 656 cr and 27 cr respectively in Q3FY14 registering a revenue growth of 5% and PAT growth of 88%. Operating profit improved substantially from Rs 42 cr in Q3FY14 to Rs 80 cr in Q3FY15 aided by softening in raw materials cost."

"ANIL's improved business performance is led by both, a robust growth in sales of high performance products as well as continued focus on cost management, supplemented by soft input prices, especially the crude linked ones. It is in line with the company's growth plans. The company has introduced some new products in the market, including water based enamel, "Dulux satin Stay Bright." For 9MFY15, ANIL's top line grew by meagre 7% compared to 9MFY14, which is below our expectation. However PAT grew by 46% over the same period on account of higher other income and expansion in operating margins which improved substantially by more than 300 bps."

"The stock currently trades at 26.6x FY16e EPS of Rs 52.38 and 20.4x FY17e EPS of Rs 68.25, which seems to be undervalued given other companies in the sector. Considering the strong prospects for Indian housing industry and low per capita consumption in India v/s global average, hence one could expect rise in consumption of paints in India. We reiterate a buy on the stock with a revised target price of Rs 1706 (previous target: Rs 1527) based on 25x FY17e earnings in the ensuing 9-12 months (Refer to our report dated 30/09/2014)", says CD Equisearch report.

Read More