Kansai Nerolac shares zoom 19% as Q1 PAT rises 36%

Shares of Kansai Nerolac Paints jumped over 19 per cent to hit an intraday high of Rs 522.25 during the early trade on Tuesday, a day after the company posted a good set of numbers for the quarter ended June 2022.

The company reported a 36.51 per cent increase in its consolidated net profit to Rs 152.05 crore for the first quarter ended June 30, 2022. It had posted a net profit of Rs 111.38 crore in the April-June period a year ago.

Revenue from operations rose 46.23 per cent to Rs 2,051.37 crore from Rs 1,402.76 crore in the year-ago quarter.

At 12.00 pm, the stock was trading 17.19 per cent higher at Rs 511.65 on BSE.

Anuj Jain, Managing Director, Kansai Nerolac Paints, said, “This quarter saw a healthy demand for both decorative and industrial paints. There has been a revival in demand in industrial segment led by increased demand in automotive due to the gradual easing of the chip shortages."

He said that while the inflationary trend continued, towards the end of the quarter, there has been some softening of input prices for crude-based items which are yet to be reflected in derivatives.

“The company has taken a price increase in decorative and industrial segments during the quarter and is in continued discussion with OEM customers for further price increases. The company focused on selling a better product mix. It continued with the aggressive cost control program and judicious management of overheads. Looking forward, with a forecast of a good monsoon, demand should remain healthy," he added.

According to the company, the size of the domestic paint industry is estimated at around Rs 60,000 crore as of March 2022. The good growth in infrastructure, the core sector as well as automobile and real estate is likely to have a positive effect on the overall demand for paint for the industry in the long run.

The scrip had hit a 52-week high of Rs 674.15 on October 6, 2021.

ICICI Securities believes that despite strong revenue growth in Q1FY23, Kansai’s three-year revenue CAGR is still lower than the industry leader amid market share loss in decorative paints. On the front of the industrial paint, the brokerage firm believes that strong automotive demand helped drive overall performance for the company in Q1FY23. This coupled with gradual price hikes across the segments led to a 190 bps recovery in gross margin QoQ.

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