Reduce Kansai Nerolac Paints; target of Rs 284: Prabhudas Lilladher

Prabhudas Lilladher recommended reduce rating on Kansai Nerolac Paints with a target price of Rs 284 in its research report dated July 31, 2024.

Broker Research

August 01, 2024 / 15:16 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

Prabhudas Lilladher's research report on Kansai Nerolac Paints

Kansai remains optimistic over near term given 1) Favorable monsoon impact on demand in festival season 2) positive outlook in non-auto industrials led by Infra, Railways, Powder coatings etc. 3) growing salience of project business and 3) Revival of demand from 2W even as PV’s and CV are expected to maintain steady growth post strong run of past 2 years. Kansai is making right moves by sustained innovation in decorative, focus on projects, new products in EV, Premium Appliances, New ancillary products, Alloy wheels and Railways. We cut our EPS estimates by 4.3/2.2% for FY25/FY26 given 1) increased spends on advertising and distribution in changed industry dynamics 2) limited scope to increase margin as lower margin Industrial paints growing close to double digits and 3) Limited GM expansion given inflation in key inputs. We estimate GM to remain flat & 50bps EBITDA margin expansion with 8.5% PAT CAGR over FY24-26.

Outlook

We value the stock at 28xJun’26 EPS (26xFY26 earlier) and assign a target price of Rs284 (Rs266 earlier). While PE multiples have limited scope of compression, competitive dynamics and success of Birla Opus will be key factor to determine valuations. Retain Reduce.

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