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.

The company has five strategically located manufacturing units all over India and a strong dealer network across the country. The company manufactures a diversified range of products ranging from decorative paints coatings for homes, offices, hospitals and hotels to sophisticated industrial coatings for most of the industries.

Quarter results

In quarter ended December 2018, sales grew 18% to Rs 1350.66 crore.

OPM fell 370 basis points to 13.1% which saw OP fall 8% to Rs 176.97 crore.

Other income stagnated at Rs 19.84 crore and interest cost was NIL. As depreciation grew 21% to Rs 23.51 crore, PBT fell 10% to Rs 173.30 crore. After providing for taxation (down 10% to Rs 60.60 crore; (tax incidence remained at 35.0%), PAT fell 10% to Rs 112.70 crore.

Nine months results

For the nine months, sales grew 15% to Rs 4020.46 crore.

OPM fell 310 basis points to 14.7% which saw OP fall 5% to Rs 592.37 crore.

Other income fell 12% to Rs 47.43 crore and interest cost was NIL. As depreciation grew 19% to Rs 66.99 crore, PBT fell 7% to Rs 572.81 crore. After providing for taxation (down 5% to Rs 198.28 crore; (tax incidence grew from 33.6% to 34.6%), PAT fell 9% to Rs 374.53 crore.

Management comments

Commenting on the results, H. M. Bharuka, Vice Chairman and Managing Director, Kansai Nerolac Paints Ltd said, "During the quarter demand was positive for Decorative but very subdued for Industrial. A delayed festive season contributed to good demand during the quarter for Decorative. Lower growth in the Automotive industry especially negative growth in passenger cars led to a lower demand for Automotive and Industrial products in general.

Cost pressures continue to be high. This coupled with inability to pass on the full impact of cost increase to Industrial customers as well as inventory loss has impacted the bottom-line. Decorative margin continues to remain healthy.

From November there was a decline in crude oil prices and a marginal strengthening of the rupee vis a vis the dollar. However prices of derivatives still need to come down. KNPL has increased prices in Decorative twice during the quarter and has obtained some price increase in Industrial to partially offset the sharp inflation seen in material costs. The impact of these should be visible in the fourth quarter.

The company expects the growth momentum to be good in Decorative but subdued for Industrial for the near future."

Valuation

The stock trades at Rs 429.