Kansai Nerolac Paints Q3 Review - Developing Market Dynamics Key To Growth Re-rating: Prabhudas Lilladher

Prabhudas Lilladher Report

We cut our earning per share estimates by 1.5%/4.6%/0.4% for FY24/FY25/FY26 given

1. 14% margin guidance for FY24

2. limited scope of margin improvement since price hikes are not expected in near to medium term along with increased expenses on manpower/ad-spends

3. Expected increase in competitive intensity post Grasim’s entry in paints business remains a key monitorable.

Kansai Nerolac Paints Ltd.'s continues to invest behind new products like paint plus, distribution expansion and NxtGen painting services and entry into new segments in industrial paints, profit growth will depend upon the competitive intensity post Grasim’s entry.

We estimate 50 basis points margin expansion over FY24-26 which will enable 11.7% profit after tax compound annual growth rate.

We downgrade rating from 'Accumulate' to Hold with target price Rs 341(earlier target price Rs 346).

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