Accumulate Kansai Nerolac Paints, target Rs 329: Prabhudas Lilladher

Prabhudas Lilladher has Accumulate call on Kansai Nerolac Paints Ltd. with a target price of Rs 329. The current market price of Kansai Nerolac Paints Ltd. is Rs 365.55. Time period given by analyst is year, when Kansai Nerolac Paints Ltd. price can reach defined target. Prabhudas Lilladher has raised its EPS estimates for FY17E and FY18E by 2.9% and 4.8%, on the back of 16% volume growth in decorative business. The brokerage is confident on the ability of the paints industry to sustain margins longer than anticipated. Decoratives outlook is positive, given likely benefits of monsoons, Pay commission and OROP. Industrial segment is also likely to recover from Q3FY17. Prabhudas Lilladher is increasing Kansai Nerolac's EBITDA margin estimates for FY17 and FY18 by 40bps and 60bps, respectively, to factor in higher gross margins and improved A PAT growth of 28.8% is expected in FY17 and 12.4% in FY18 on 110bps gross margin expansion in FY17 and 90bps contraction in FY18. Sustained softness in crude prices can provide upside risk to our FY18 EPS estimates.