ICICI Direct recommended hold rating on Kansai Nerolac Paints with a target price of Rs 455 in its research report dated May 03, 2019.
ICICI Direct's research report on Kansai Nerolac Paints
Kansai Nerolac (KNL) reported lower-than expected volume growth at 3% (vs. I-direct estimate: 7% YoY) mainly hit by industrial paint segment where volumes de-grew 5% YoY (vs. I-direct: 2%). Decorative segment volume growth at 9% YoY was also below our estimate of 11% YoY. Lower volume growth, delay in passing on price hike in the industrial paint category weigh on EBITDA margin, which declined ~220 bps YoY. As a result, PAT declined 11% YoY. While we cut our revenue, earning estimates for FY20E-21E believing continuous weakness in the automotive industry, we believe margin pressure will ease owing to passing on of inflationary cost and favourable product mix.
We value KNL at 40x FY21E earnings and cut our target price from Rs 480 to Rs 455. We revise our rating from BUY to HOLD.
For all recommendations report, click here
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