Prabhudas assigns outperformer on Kansai Nerolac Paint
Prabhudas has recommended outperformer on Kansai Nerolac Paint for a target price of Rs 902.
By INDIATIMES NEWS NETWORK |
MUMBAI: Prabhudas has recommended outperformer on Kansai Nerolac Paint for a target price of Rs 902.
Kansai Nerolac Paints’ October-December quarter results were better than Prabhudas expectations. Net sales grew by 7.1 per cent year on year from Rs 323 crore to Rs 345 crore (the brokerage expected Rs 330 crore), mainly due to good growth in the decorative segment and the festival season falling during the quarter.
However, auto segment had a negative growth. Incentive schemes in the white good segment nullified the impact of negative growth of auto sector to some extent. EBIDTA margin improved by 110 basis points from 13.3 per cent to 14.4 per cent year on year (the brokerage expected 13.1 per cent) due to reduction in material cost. It declined by 120 basis points from 65.2 per cent to 64 per cent of net sales.
The company’s net profit grew by 17 per cent year on year from Rs 25.8 crore to Rs 30.2 crore (the brokerage expected Rs 28 crore).
The company is setting up a greenfield manufacturing facility at Hosur, Tamil Nadu for the manufacture of water-based paints. Capital expenditure of Rs 69 crore for the project is likely to be met through internal accruals, says Prabhudas.
Prabhudas expects the company to report 15 per cent CAGR in net sales and 18 per cent CAGR in net profit over the next three years. The brokerage also expects EBIDTA margin to improve from 13.2 per cent in 2006-07 to 14.3 per cent in 2009-10 due to the introduction of new products, new shades, new finishes and water-based paints.
At the CMP of Rs 713, the stock trades at 16.0x FY08E EPS of Rs 44.5, 13.3x FY09E EPS of Rs 53.5 and 11.1x FY10E EPS of Rs 64.4.
Kansai Nerolac shares ended flat at Rs 746 on the BSE.
Kansai Nerolac Paints’ October-December quarter results were better than Prabhudas expectations. Net sales grew by 7.1 per cent year on year from Rs 323 crore to Rs 345 crore (the brokerage expected Rs 330 crore), mainly due to good growth in the decorative segment and the festival season falling during the quarter.
However, auto segment had a negative growth. Incentive schemes in the white good segment nullified the impact of negative growth of auto sector to some extent. EBIDTA margin improved by 110 basis points from 13.3 per cent to 14.4 per cent year on year (the brokerage expected 13.1 per cent) due to reduction in material cost. It declined by 120 basis points from 65.2 per cent to 64 per cent of net sales.
The company’s net profit grew by 17 per cent year on year from Rs 25.8 crore to Rs 30.2 crore (the brokerage expected Rs 28 crore).
The company is setting up a greenfield manufacturing facility at Hosur, Tamil Nadu for the manufacture of water-based paints. Capital expenditure of Rs 69 crore for the project is likely to be met through internal accruals, says Prabhudas.
Prabhudas expects the company to report 15 per cent CAGR in net sales and 18 per cent CAGR in net profit over the next three years. The brokerage also expects EBIDTA margin to improve from 13.2 per cent in 2006-07 to 14.3 per cent in 2009-10 due to the introduction of new products, new shades, new finishes and water-based paints.
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At the CMP of Rs 713, the stock trades at 16.0x FY08E EPS of Rs 44.5, 13.3x FY09E EPS of Rs 53.5 and 11.1x FY10E EPS of Rs 64.4.
Kansai Nerolac shares ended flat at Rs 746 on the BSE.
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