ICICI Securities research report on Kansai Nerolac Paints
Kansai reported revenue growth of +5.1% compared to Asian Paints (+7%) and Akzo (+6.6%) YoY. Its EBITDA margin expansion (+294bps) was also lower than Asian Paints (+537bps) and Akzo (+331bps) YoY. While Kansai is biggest beneficiary of revival in Automotive sector, it has likely lost market shares decorative paints in our view. Gain on sale of land at Thane (~INR 5.1bn post tax) is likely to provide growth capital when the competitive intensity is likely to increase from Q4FY24. Though correction in crude oil prices may provide interim relief in FY24E, we model Kansai to face steep competitive pressures post Grasim’s entry. We also model likely impact on industry profit pool.
Outlook
Maintain REDUCE with DCF based revised target price of INR 300 (implied P/E of 21x FY25E).
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