Hold Kansai Nerolac Paints; target of Rs 278: Prabhudas Lilladher

Prabhudas Lilladher's research report on Kansai Nerolac Paints

KNPL delivered stable results in a tepid demand environment led by ~4% volume growth as high single digit growth in Industrial Paints and success of new initiatives like Paint+, wood coatings, waterproofing and Projects business. Competitive intensity remains intense as Birla Opus has garnered around 4-5% market share. Medium term outlook looks positive given 1) pickup in discretionary demand post tax cuts 2) positive outlook in non-auto industrials led by strong order pipeline across Infra, Railways, Powder coatings etc. 3) growing salience of project business and 4) Share gain in auto paints which should also see recovery with expected uptick in consumer demand.

Outlook

The downside is capped given strong base in industrial paints (45% of sales) and ~10% of market cap being in cash (Rs19bn by FY25E). We value the stock at 27xMar27 EPS (27xDec’26 earlier) and assign a target price of Rs278 (Rs274 earlier). Upgrade KNPL to HOLD from Reduce.