Kansai Nerolac zooms 34% in 3 days on strong Q1 operational performance

The management foresees uptick in demand across the paint industry to be driven by strong expansion in the infrastructure, core sector, automotive, and real estate industries.

Shares of Kansai Nerolac Paints gained 6 per cent to Rs 535.90 on the BSE in Wednesday’s intra-day trade. The stock extended its two-day rally after the company reported strong operational performance for the quarter ended June 2022 (Q1FY23).

The stock of this paints company has zoomed 34 per cent in three days from Rs 400.65 on Friday, July 29, 2022. That apart, it has also recovered 50 per cent from its 52-week low level of Rs 358.05 that it had touched on June 22, 2022. That said, the stock had hit a 52-week high of Rs 674.15 on October 6, 2021.

In Q1FY23, Kansai Nerolac reported 33 per cent year-on-year (YoY) jump in consolidated earnings before interest, taxes, depreciation, and amortization (Ebitda) at Rs 255 crore. However, Ebitda margin declined 120 basis points (bps) to 12.4 per cent from 13.6 per cent in the year-ago period.

The company’s consolidated profit after tax grew 36.5 per cent YoY at Rs 152 crore, on the back of healthy 46 per cent rise in net revenue of Rs 2,051 crore, over the same quarter of previous year.

The company saw healthy demand for both decorative and industrial paints in Q1FY23. They also saw revival in demand in industrial segment, driven by higher automotive demand as chip shortages eased.

"While inflationary trend continued towards the end of the quarter, there has been some softening of input prices for crude-based items which is yet to be reflected in derivatives.  The company has taken prices increase in decorative and industrial during the quarter and is in continued discussion with OEM customers for further price increase," the management said.

Sharing outlook for the company, the management said that the automotive sector reflected positive sentiments as chip shortage issue faded.

"Over the next one year, the demand across the paint industry is projected to be positively impacted by strong expansion in the infrastructure, core sector, automotive, and real estate industries," the management added.