India's Kansai Nerolac Paints posts lower Q2 profit as low demand, high costs hit margins

Berger Paints India

06/11/2024 12:45

Nov 6 (Reuters) - India's Kansai Nerolac Paints  KANE.NS  posted a near 31% fall in
second-quarter profit on Wednesday, hurt by muted demand due to heavy monsoons and as expenses were
higher.
    The company, majority owned by Japan's Kansai Paint Co  4613.T , said its consolidated net
profit fell to 1.23 billion rupees ($14.6 million) in the three months ended Sept. 30 from 1.77
billion rupees a year earlier.
    Kansai Nerolac's revenue from operations fell 0.3% to 19.51 billion rupees during the quarter.
    Moreover, its total expenses rose 3.3% to 17.95 billion rupees, weighing on profit margins.
    
    KEY CONTEXT 
    Sluggish demand in Kansai Nerolac's decorative segment was due to heavy and extended monsoons
and it expects demand to improve in the second half, the company said in an exchange filing.
    Paint companies have raised prices by 2%-2.5% during the quarter after heavy discounting in the
previous quarters, analysts at Anand Rathi have said.
    But their expenses were impacted by volatile crude oil prices, while costs of raw materials
like additives increased, analysts have said.
    Moreover, Grasim Industries'  GRAS.NS  entry in the paints business earlier this year has kept
competition intensive in the sector.
    Rival Berger Paints India  BRGR.NS  missed quarterly estimates on Tuesday, also hurt by higher
rainfall and as price hikes dampened demand.
    
    PEER COMPARISON
    
                           Valuation (next   Estimates (next        Analysts' sentiment       
                              12 months)       12 months)                                     
                RIC        PE       EV/EBIT  Revenue  Profit   Mean      # of      Stock to   Div
                                    DA       growth   growth   rating*   analysts  price      yield
                                             (%)      (%)                          target**   (%)
 Kansai          KANE.NS     29.61    18.95   7.60     18.80   Hold            11    0.89      0.88
 Nerolac                                                                                      
 Paints Ltd                                                                                   
 Asian Paints    ASPN.NS     52.89    36.07   7.53     1.53    Hold            34    1.02      1.13
 Ltd                                                                                          
 Berger Paints   BRGR.NS     48.39    30.50   8.59     7.22    Sell            19    1.03      0.65
 India Ltd                                                                                    
 Akzo Nobel      AKZO.NS     45.07    28.85   7.90     6.46    Buy              2    1.51      1.70
 India Ltd                                                                                    
 
 * The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong
Sell
 ** The ratio of the stock's last close to analysts' mean price target; a ratio above 1 means the
stock is trading above the PT
    
    JULY-SEPTEMBER STOCK PERFORMANCE 
    
    
-- All data from LSEG IBES

-- $1 = 84.3040  Indian rupees


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Kansai Nerolac India Q2 Results    https://tmsnrt.rs/4fcTWPf
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 (Reporting by Dimpal Gulwani; Editing by Savio D'Souza)
 ((Dimpal.Gulwani@thomsonreuters.com;))