Kansai Nerolac Q1- Industrial Segment Drives Healthy Growth; To Maintain Strong Growth Ahead: ICICI Securities

ICICI Securities Report

Kansai Nerolac Paints Ltd.’s Q1 FY25 was largely in-line with expectations. We note:

1. Performance coatings has reported strong growth in June-24 and is likely to be the chief growth driver with thrust on infrastructure and a strong order pipeline of projects.

2. Decorative segment reported muted numbers due to elections, labour shortage, heat wave and carry-over price cut of ~4%. However, we believe normal monsoon as well as the activations in digital media by Kansai should help report revival in the rest of FY25.

3. We believe Kansai will also likely benefit from price hikes in the paint industry, which will allow it to pass on the inflation in input prices and also invest more in brand-building activities.

45% of Kansai’s business i.e., industrial coatings, is likely to face negligible competitive pressures. We believe it also has the option to use the cashflows from industrial coatings to support the decorative paints segment to maintain market share.

We reckon [comfortable] competitive equilibrium in paints is likely broken. Retain underweight on large cap paints. Contrarian investors may consider owning Akzo Nobel/Indigo Paints/Kansai Nerolac.

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