The Hindu Business Line : Goodlass Nerolac shines on strong fundamentals

IMPROVED fundamentals and good growth prospects have shored up market interest in the counter of Goodlass Nerolac Paints Ltd (GNPL), with the stock hitting a 52-week high of Rs 489.95 intra-day on the bourses today.

According to market sources, the company is attractively valued given that it has entered a higher growth trajectory.

"GNPL is the only company to have registered a revenue growth of 17.6 per cent as against an industry growth of 10 per cent," says analyst, Mr Anshul Trivedi of B&K Securities.

GNPL currently enjoys a 65-per cent share in the automotive paints industry and thus is touted as the biggest beneficiary from any positive development in the auto boom. Its major clients include Maruti, Tata Motors, Hero Honda, Hyundai and Bajaj where GNPL is the Tier I supplier.

"A projected 15 per cent growth in the auto industry in FY-05 is a positive development for GNPL," Mr Trivedi added.

Analysts maintain that the company has also increased its aggressiveness in the decorative segment. "Going forward, improved positioning of products and higher advertising expenditure (up 133 per cent y-o-y to Rs 18 crore ) will yield improved revenues and profitability," an analyst said.

According to Mr Trivedi the fact that Jensen Nicholson which had a 6 per cent share in the Indian paints sectors but has shut up shop due to financial dissolution, has thrown open a ready market to be tapped. With the consumer durable sector riding strong on a 14-15 per cent projected growth, an upside in GNPL revenues from this segment is also expected in FY-05. GNPL has a market share of 85 per cent in the dry powder category in the consumer goods sector.

When contacted Mr H.M. Bharuka, Managing Director, Goodlass Nerolac, told Business Line that the auto boom has enabled the company to increase its market share in the automotive paints industry.

"We are extremely bullish on the auto sector which will directly benefit us. In the decorative segment, we are looking at organic growth at this juncture and in the short-term hope to do better than the industry," the MD said. Commenting on concerns over raw material prices being at a peak, Mr Bharuka said despite that the company has registered a good growth in its bottomline.

Analysts opine that there is potential for the company to augment its margins upwards by 15 per cent.

On capex plans, Mr Bharuka said that the company is setting up a new factory, which will increase its existing capacity by 25 per cent.

The stock ended the day at Rs 471.05, up 2.96 with around 9,576 shares traded on the BSE. On the NSE, the stock closed at Rs 480.70, up 5.53 per cent with around 25,670 shares traded.

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