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Kansai Nerolac surges 11% on strong revenue growth

ICICI Securities underlines that despite strong revenue growth in Q1FY23, Kansai’s three-year revenue CAGR is still lower than industry leader amid market share loss in decorative paints.

August 02, 2022 / 10:07 AM IST
 
 
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Shares of Kansai Nerolac Paints spiked over 11 percent on August 2 after the company came out with its June quarter numbers. The growth numbers were strong , a positive surprise for the Street amid high input prices.

As of 9.43 am, the stock was up 11 percent at Rs 484 on BSE.

For the quarter, the company declared a net revenue of Rs 1,944.6 crore, a growth of 47.1 percent over the corresponding quarter of the previous year. EBIDTA was Rs 255.6 crore, a growth of 34.7 percent over the same quarter of the previous year.

Net profit was Rs 162.9 crore, a growth of 37% over the same quarter of the previous year.

“This quarter saw a healthy demand for both Decorative and Industrial Paints. There has been a revival in demand in Industrial led by increased demand in Automotive due to the gradual easing of the chip shortages,” said Anuj Jain, Managing Director, Kansai Nerolac Paints.

Decline in crude oil prices, which are down below $100 per barrel now, also helped sentiments. Crude oil is a key raw material for the paint industry. Its prices have softened amid expectation of a slowdown in demand from some quarters.

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Jain acknowledged there has been some softening of input prices for crude-based items but that is yet to be reflected in derivatives. He added that the company has undertaken prices increase in decorative and industrial during the quarter and is in continued discussions with customers for further price increase.

Kansai Nerolac said 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 in the long run.

ICICI Securities underlines that despite strong revenue growth, Kansai’s three-year revenue CAGR is still lower than industry leader amid market share loss in decorative paints.

“On the industrial paints front we believe strong automotive demand helped drive overall performance for the company in Q1FY23,” it said. “This coupled with gradual price hikes across the segments led to 190 bps recovery in gross margin QoQ. We await management commentary on decorative paint demand outlook and sustainability of EBITDA margin amid rising competition.”

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Moneycontrol News
first published: Aug 2, 2022 10:07 am

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