Kansai Nerolac Q2 Review - Weak Market Forces, Investments In Trade Weigh On Profitability: ICICI Securities

ICICI Securities Report

While Kansai Nerolac Paints Ltd.’s Q2 FY25 revenues were in-line with expectations, Ebitda margin was below estimates. We note-

1. carry-over effect of price cuts,

2. investments in strengthening marketing/sales team; and

3. higher share-of-voice has led to Ebitda margin contracting 311bps YoY.

We model, decorative paint segment revenue growth to improve in H2 FY25 driven by price hikes, likely revival in off-take and favorable base. Benefits of normal monsoon and the initiatives in trade shall also be realised in H2 FY25. Industrial coatings continue to perform well with strong off-take of automotive and performance coating.

Kansai will also realise Rs 7.28 billion (pre-tax) due to sale of its Lower Parel (Mumbai) land along with building. While Q2 FY25 results were weak, we note correction in crude may offer margin tailwind. We broadly retain FY26 estimates Add.

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.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.