Kansai Nerolac Q4 Results Review- Likely Market Share Gains In Economy Segments, Ancillaries: ICICI Securities

ICICI Securities Report

Kansai Nerolac Paints Ltd. reported weaker-than-expected Q4 FY24. Picking the positives -

1. likely market share gains economy segment and ancillaries (10% volume growth in H2 FY24 YoY),

2. benefits of its investments in distribution, new products and brand building over past 18-24 months visible now,

3. industrial, automotive paints (45% of net sales) is likely to perform well (no material change in competitive positioning), automotive production and capex upcycle augurs well.

Kansai Nerolac is planning to increase capacity of Industrial paints by 850 million tonnes/month at Sayakha and Bawal plants at capex of Rs 495 million. It is also in process to unlock value in its two excess land parcels at Mumbai (Lower Parel and Thane) for total consideration of Rs 14 billion. Additional resources provide ammunition to compete effectively. 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.

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