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Kotak Securities
Kansai Nerolac Paints (Buy)
CMP: ₹490.60
Target: ₹600
We recently interacted with the management of Kansai Nerolac Paints (KNPL) to understand the developments in the company and in the sector.
KNPL has been experiencing double digit volume YoY growth across segments since the last 12 quarters surpassing the performance of Asian Paints and Berger. The strong out-performance is on the back of: 1) strong volume growth witnessed by the paint sector; 2) New and innovative product launches by the company; 3) Strong distribution network of the company (20,000+ dealers and 102 depots);4) Heavy promotion through multiple media platforms; and 5) Sales aggression exhibited by the company.
Management (and we agree) expect the growth momentum to continue in medium term as well with increasing disposable income, healthy GDP growth, strong automotive demand and private/public sector capex in the country.
Recommend buy with an unchanged target price of ₹600 at 44x FY20E earnings
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