Target: ₹573

CMP: ₹411.45

Kansai Nerolac (KNPL) revenue grew 0.9 per cent y-o-y to ₹1,826 crore, while sequentially it posted a decline of 5.4 per cent on the back of extended monsoon, shorter festive season (Diwali), high inventory stocking due to price increase in the previous year.

KNPL gross profit de-grew 1.7 per cent y-o-y to ₹555.5 crore, while q-o-q it was flat. Further, PAT declined 13 per cent y-o-y and 2 per cent q-o-q.

In a concall, the company said: It has high price inventory, margin improvement will be gradual; focus on premiumisation of products across all segments, and on entering TAM, an additional market, which would support technology and further boost growth in the automotive space; for non-auto segment, focus will be towards premiumisation and high-technology order; year to date, KNPL has taken price hike of 3 per cent; four launches during the quarter; the company is working on getting approval from infrastructure projects such as Vande Bharat, Bullet Train and Mumbai coastal project, etc.

Going ahead, we expect revenue and margins to expand, driven by improving demand for decorative and industrial segment; government focus on infrastructure and demand from housing and real estate sector would aid sentiments too. We maintain a Buy rating with a revised price target downwards to ₹573.