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Akzo Nobel (Buy)
CMP: ₹1,273
Target: ₹1,527
Akzo Nobel India (ANIL) manufactures and markets a wide range of coatings covering decorative paints, performance coatings and speciality chemicals, having its registered office in Kolkata, India.
According to the latest Assocham report, Indian paints industry is set to grow at about 20 per cent CAGR over the next two years and is likely to surge to ₹60,000 crore in FY2016 from ₹40,600 crore in FY 2014. The decorative paints segment contributed nearly 73 per cent at ₹29,638 crore, while the remaining ₹10,962 crore was contributed by the industrial segment. Some factors that will fuel the decorative paints industry’s growth are expected rise in GDP growth rate, rise in disposable income (on account of fall in inflation) which will lead to higher discretionary spending, stable exchange rate, moderating inflation, consumer’s shift to premium products, shortening of re- painting cycle and better demand from tier II and tier III cities.
In spite of slowdown in GDP growth, sluggish macro-economic environment, rising inflation etc, over the last few years, ANIL’s net sales witnessed an impressive growth of 21 per cent over the last 5 years. We expect ANIL’s top line to grow by 15 per cent and 18 per cent in FY15e and FY16e respectively on account of expected rise in GDP growth rate and other macro factors improving.
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