Accumulate Kansai Nerolac Paints, target price Rs 563: Prabhudas Lilladher

Prabhudas Lilladher has accumulate call on Kansai Nerolac Paints with a target price of Rs 563. The current market price of Kansai Nerolac Paints is Rs 450.

Kansai Nerolac Paints Ltd., incorporated in the year 1920, is a Large Cap company (having a market cap of Rs 24219.05 Crore) operating in Building Materials sector.

Kansai Nerolac Paints Ltd. key Products/Revenue Segments include Paints, Enamels, Varnishes, Other Operating Revenue and Scrap for the year ending 31-Mar-2022.


Financials
For the quarter ended 30-09-2022, the company reported a Consolidated Total Income of Rs 1935.03 Crore, down -5.89 % from last quarter Total Income of Rs 2056.20 Crore and up 19.00 % from last year same quarter Total Income of Rs 1626.12 Crore. Company reported net profit after tax of Rs 111.21 Crore in latest quarter.

Investment Rationale
The brokerage expects QoQ gross margins improvement from 4Q23, although volatility in commodity prices remains a key factor to watch out for. It estimates PAT CAGR of 36.1% over FY22-25 on a depleted base and value the stock at 35x Sept24 EPS assigning a TP of Rs 563 (Rs523 earlier). Incremental market share loss and aggressive entry by Grasim in decorative paints remains a key risk to our call.

Promoter/FII Holdings
Promoters held 74.99 per cent stake in the company as of 30-Sep-2022, while FIIs owned 3.28 per cent, DIIs 13.26 per cent.