भारत की पेंट कंपनी Kansai Nerolac Paints

Dear investor,

Please find below mentioned short term fundamental stock for delivery purpose.

CMP 444

Target 490

Fundamental

• Market Cap:  23,958 Cr.
• Current Price:  444.55
• 52 weeks High / Low  573.00 / 293.70
• Book Value:  69.77
• Stock P/E: 46.58
• Dividend Yield: 0.71 %
• ROCE: 18.19 %
• ROE: 14.33 %
• Sales Growth (3Yrs): 9.22 %
• Listed on BSE and NSE
• Company Website
• Face Value:  1.00

• PEG Ratio: 3.40
• Promoter holding: 74.99 %
• Pledged percentage: 0.00 %
• Debt:  178.22 Cr.
• Price to Earning: 46.58
• EPS:  9.67
• Net profit:  521.01 Cr.
• Profit growth: 17.36 %
• Profit growth 7Years: 13.89 %
• Net profit preceding 12months: 540.99 Cr.
• Profit growth 3Years: 2.94 %
• Dividend yield: 0.71 %
• Debt to equity: 0.05
• Sales last year:  5,280 Cr.
• Sales growth: -2.66 %
• Unpledged promoter holding: 74.99 %
• Investments:  305.95 Cr.
• Intrinsic Value:  525.66

Kansai Nerolac Paints (KNPL), now in its 100th year, has been at the forefront of paint manufacturing pioneering a wide spectrum of quality paints. The company is the largest Industrial paint manufacturing company in India. It is engaged in the industrial, automotive and powder coating business. It develops and supplies paint systems used on the finishing lines of electrical components, cycle, material handling equipment, bus bodies, containers and furniture industries. Aditya Birla Sun Life AMC is the largest minority shareholder with 2.9% shareholding. Market cap is of KNPL is Rs 23,373 cr.

 

Investment rationale
 

Largest industrial paint company: KNPL is one of most trusted brand in paint industry and has six strategically located manufacturing units all over India and a strong dealer network across the country. In Industrial paint market it has market share of close to 40% where the 75% of Indian paint industries falls under decorative paint segment. In the decorative paint segment it manufactures Interior wall paints, Exterior wall paints, Wood surface paints and Metals surface paints etc. In Automotive Coating it produces Pre-Treatment Chemicals, Electro-deposition. Intermediate Coats/Primer Surfaces, Topcoats, Clear Coats, Touch Up Paints, Auto Refinishing Products, Heat Resistant Paints, Underbody Paints & PVC Sealants & Rapgard Transit Protection Films.

Strong parentage: Kansai Paint, Japan, is the parent company of KNPL. Kansai paint is the largest paint company of Japan & 8th largest of the world that has presence in 80 countries via 152 companies. KNPL receives functional leverage to improve operational efficiency and shape business along with technological support from its parent.

Low inventory & possibility of pent-up demand in auto sector might turn favourable: The global pandemic has plagued the automotive sector (in fact the whole economy) with sales figure losing its growth traction. Green shoots are emerging from the economic rubble as auto companies are witnessing increasing online inquiries that might ultimately turn favourable for KNPL.

Recent quarter update (Q4FY20): Sales and Bottomline was impacted this quarter due to the outbreak of COVID 19. Demand for Automotive paints continued to be severely impacted due to the continued unprecedented slowdown in Auto. Decorative growth was better. Company has responded with aggressive cost control program and judicious management of overheads to control the operational efficiency in the unprecedented events of pandemic. PBT was impacted due to lower other income and higher depreciation. In the challenging business situation, company was also able to release cash of Rs. 123 Cr from working capital. We believe next 2 quarters are likely to be subdued for KNPL.

​Valuation & outlook: The paint industry has registered double digit CAGR growth in last 25 years. Though the current nation-wide lockdown & slowdown in economy is expected to disrupt industry growth in near term, the long term growth drivers are still intact (low per capita consumption, constant double digit growth, transition from unorganized to organized sector etc.). Over the last 6 years company has grown at a CAGR of 6.6% & 11.1% on topline & bottomline respectively with a debt-free status. At current price the stock is trading at 47.1x on its 1-year forward earnings.
 

Duration of recommendation: Short to Medium term.
 

Note 

Before investment advice your financial advisor.