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Kansai Nerolac Paints (KNPL), a 69.27% subsidiary of Kansai Paint Co., Japan, started as Gahagan Paints and Varnishes Co. Ltd. in the year 1920. Kansai Nerolac is a strong player in the paint industry with high reputation for quality, innovation and brand identity. Today it is the second largest paint company in India.
The company has over the years developed a variety of products in order to meet customer demand in the Decorative, Automotive, Auto Refinish, Performance Coating and Powder Coating segments of the market.
June 2018 quarter results
In quarter ended June 2018, sales grew 17% to Rs 1375.92 crore.
OPM fell 160 basis points to 16.0% which saw OP grow 6% to Rs 220.45 crore.
Other income fell 32% to Rs 13.60 crore and interest cost was NIL. As depreciation grew 13% to Rs 20.40 crore, PBT grew 2% to Rs 213.65 crore. After providing for taxation (up 8% to Rs 73.81 crore; tax incidence grew from 32.7% to 34.5%), PAT fell 1% to Rs 139.84 crore.
FY 2018 results
For FY 2018, sales grew 15% to Rs 4586.57 crore.
OPM fell 110 basis points to 17.2% which saw OP grow 8% to Rs 789.77 crore.
Other income fell 26% to Rs 72.42 crore and interest cost was NIL. As depreciation grew 9% to Rs 75.79 crore, PBT grew 4% to Rs 786.40 crore. After providing for taxation (up 7% to Rs 270 crore; tax incidence grew from 33.4% to 34.3%), PAT grew 2% to Rs 516.40 crore.
Management comments
Commenting on the results, H. M. Bharuka, Managing Director, Kansai Nerolac Paints Ltd said, "As seen in the previous quarters, company has continued to witness double digit growth in all segments this quarter also. The quarter witnessed upward movement in crude along with lot of volatility in forex and depreciation in the rupee resulting in high inflation. The company continues to make sustained efforts to get price increases from its customers. The company expects the growth momentum to be sustained in the near future due to favorable macro- economic factors, though pressure on margins due to crude oil price increases and a volatile exchange rate will continue."
Outlook of Indian Paint Industry
The size of domestic paint industry is estimated at Rs.47000 crore as of March 2018. The good growth in infrastructure, core sector as well as automobile and real estate is likely to have a positive effect on the overall demand of paint for the industry.
Valuation
The stock trades at Rs 475.
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