Kansai Nerolac - Making Right Moves In Competitive Environment: Prabhudas Lilladher

Prabhudas Lilladher Report

We attended the India strategy Session of Kansai Paints, Japan (market cap $3.6 billion) where Kansai Nerolac Paints Ltd. (market cap $3.2 billion) highlighted its key initiatives and growth strategies.

Kansai Nerolac is following a 360 degree growth strategy which involves-

1. 11 new Deco launches aimed at increasing share of premium products,

2. distribution expansion with a focus to increase traction in less indexed south and west India,

3. online incentive to influencers to push sales,

4. technology led innovations in auto paints (including electric vehicle) to increase traction,

5. extension of B2B segment to 75 cities,

6. technology backed products to sustain leadership in powder coatings and gain from rising Infra spends in other industrial paints including railways,

7. aim to increase share of waterproofing and allied segments from 5% to 10% of sales.

Kansai Nerolac has been taking all the right steps, however valuations at 27.2 times FY26 are factoring in expected increase in competition and consequent threat to market share and profitability post Grasim’s entry.

We believe improving sales traction and profitability in Industrial paints (45% of sales), could be a saving grace given for Kansai Nerolac given parent’s strength in industrial paints.

We estimate 27.9% profit after tax compound annual growth rate over FY23-26 and 13.3% CAGR over FY24-26.

Retain accumulate with target price of Rs 370 based on 32 times Sept25 earnings per share (Rs 351 earlier based on 32 times FY25 EPS).

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