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ICICI Securities Report
Kansai Nerolac Paints Ltd. reported revenue growth of +5.1% compared to Asian Paints Ltd. (+7%) and Akzo Nobel India Ltd. (+6.6%) YoY. Its Ebitda margin expansion (+294 basis points) was also lower than Asian Paints (+537 bps) and Akzo (+331 bps) YoY.
While Kansai is biggest beneficiary of revival in automotive sector, it has likely lost market shares decorative paints in our view.
Gain on sale of land at Thane (~Rs 5.1 billion post tax) is likely to provide growth capital when the competitive intensity is likely to increase from Q4 FY24.
Though correction in crude oil prices may provide interim relief in FY24E, we model Kansai to face steep competitive pressures post Grasim’s entry.
We also model likely impact on industry profit pool. Maintain 'Reduce' with discounted cash flow based revised target price of Rs 300 (implied price/earning of 21 times FY25E).
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