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.

December 2017 quarter results

In quarter ended December 2017, sales grew 14% to Rs 1145.01 crore.

OPM fell 120 basis points to 16.8% which saw OP grow 6% to Rs 192.24 crore.

Other income fell 20% to Rs 19.76 crore and interest cost was NIL. As depreciation grew 10% to Rs 19.37 crore, PBT grew 2% to Rs 192.63 crore. After providing for taxation (up 4% to Rs 67.48 crore), PAT grew 1% to Rs 125.15 crore.

Nine months results

For the nine months ended December 2017, sales grew 14% to Rs 3483.01 crore.

OPM fell 70 basis points to 17.8% which saw OP grow 10% to Rs 620.84 crore.

Other income fell 28% to Rs 53.79 crore and interest cost was NIL. As depreciation grew 8% to Rs 56.12 crore, PBT grew 5% to Rs 618.51 crore. After providing for taxation (up 4% to Rs 207.92 crore), PAT grew 5% to Rs 410.59 crore.

Management comments

"The company has witnessed double digit growth in all segments this quarter, led by decorative. This quarter the effect of early Diwali which led to preponing of sales last quarter as well as base effect of demonetization is visible in sales growth. Inflation was more pronounced this quarter. The company is making substantial efforts to get price increases from its customers. Going forward, we expect the growth momentum to be sustained due to favourable macro-economic factors, though there could be pressure on margins due to crude oil price increase and volatility in exchange rate" said Kansai Nerolac Paints Managing Director H M Bharuka.

Enhancement in the quantum of proposed capacity expansion at its plant in Goindwal

The company announced enhancement in the quantum of proposed capacity expansion at its plant in Goindwal Sahib near Amritsar in Punjab. The proposed capacity expansion has been enhanced from 36,000 Kilo Liter per annum (KLpa) to 52,800 KLpa.

While proposed capacity expansion will be enhanced by 47% (in KLpa terms), the budgeted cost of the project will rise by only 20%. It will now be Rs 216.50 crore against Rs 180.50 crore announced earlier. This indicates that the incremental cost of expansion will be lower.

Enjoys strong parent support

The continued technology focus from the parent Kansai Paint Co. Ltd. (which holds 69.27% stake in the company), Japan has helped bring the latest technology products. Based on the excellent track record and new technology offerings, Multiple New OEM Business have been awarded for future business prospects. In addition the company's state-of-the-art Hosur plant is now fully operational and has been approved as a factory of supply by Industrial customers as well.

The company is a leader in Industrial Paints

Kansai Nerolac is the leader in the Industrial Coatings market space and it continues to increase its market share in this space. It has extended its close interaction with customers to the areas of Performance coatings which has helped it increase its market share. The company now serves a vast array of OEM industries with a variety of products.

Complete system capability with advanced technological products introduced over the years has been instrumental in sustaining the leadership for industrial business segment. KNPL has always launched products for customers across various market segments which are innovative and technologically superior.

The industrial team has undertaken the initiative of "Train the customers". The team imparted training, gave colour presentations and also suggested many improvement areas related to painting and safety to Multiple OEMs and Auto ancillaries.

Outlook

The size of domestic paint industry is estimated to be Rs 43000 crore as of March 2017. The good growth in infrastructure, core sectors as well as automobiles and real estate is likely to have a positive effect on the overall demand of paint for the industry.

Valuation

The share price trades at Rs 532.