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S t r o n g s a l e s g r o w t h , m a r g i n s s t i l l a c o n c e r n …
Kansai Nerolac reported healthy growth in its topline for the quarter
ended Q1FY12, reporting a growth 24.1% to | 651.7 crore over | 525.1
crore in the corresponding quarter last year. We believe this was led both
by increase in realisation as well as higher volumes. However, margins
continued to remain under pressure, declining by ~110 bps (YoY) from
15.3% to 14.2% in Q1FY12 but improving by 285 bps (QoQ) from 11.3%
(lowest in the past eight quarters) in Q4FY11. Higher sales led to earnings
growth of ~18% to | 61.2 crore over | 51.9 crore in Q1FY11.
ƒ Operational performance
During the quarter, the company witnessed strong demand in the
decorative segment. However, industrial paints demand witnessed
moderation led by the slowdown in demand for automobiles, white
goods and electrical appliances.
Higher raw material cost continued to impact margins. Raw material cost
to sales ratio for the quarter stood at 65.6% compared to 64.5% in
Q1FY11 and ~67% in Q4FY11. Though the company has been able to set
off the impact of higher material costs by increasing prices thereby
improving its margins on QoQ basis; margins on a YoY basis continued
to witness a slowdown.
V a l u a t i o n
At the CMP, the stock is trading at 19.7x and 17.1x its FY12 and FY13
estimated EPS of | 45.5 and | 52.4, respectively. With the company being
the leader in the industrial paints segment and extending its reach in the
decorative segment, we believe that sales growth would continue to
remain strong. However, with commodity prices, crude oil and titanium
dioxide expected to rise further we believe that margins would remain
capped at current levels. With the company having no interest cost
burden, an improvement in margins and sales would directly boost the
earnings growth. Hence, we have valued the stock at 20x its FY13E EPS,
and assigned it a BUY rating with a target price of | 1048.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
S t r o n g s a l e s g r o w t h , m a r g i n s s t i l l a c o n c e r n …
Kansai Nerolac reported healthy growth in its topline for the quarter
ended Q1FY12, reporting a growth 24.1% to | 651.7 crore over | 525.1
crore in the corresponding quarter last year. We believe this was led both
by increase in realisation as well as higher volumes. However, margins
continued to remain under pressure, declining by ~110 bps (YoY) from
15.3% to 14.2% in Q1FY12 but improving by 285 bps (QoQ) from 11.3%
(lowest in the past eight quarters) in Q4FY11. Higher sales led to earnings
growth of ~18% to | 61.2 crore over | 51.9 crore in Q1FY11.
ƒ Operational performance
During the quarter, the company witnessed strong demand in the
decorative segment. However, industrial paints demand witnessed
moderation led by the slowdown in demand for automobiles, white
goods and electrical appliances.
Higher raw material cost continued to impact margins. Raw material cost
to sales ratio for the quarter stood at 65.6% compared to 64.5% in
Q1FY11 and ~67% in Q4FY11. Though the company has been able to set
off the impact of higher material costs by increasing prices thereby
improving its margins on QoQ basis; margins on a YoY basis continued
to witness a slowdown.
V a l u a t i o n
At the CMP, the stock is trading at 19.7x and 17.1x its FY12 and FY13
estimated EPS of | 45.5 and | 52.4, respectively. With the company being
the leader in the industrial paints segment and extending its reach in the
decorative segment, we believe that sales growth would continue to
remain strong. However, with commodity prices, crude oil and titanium
dioxide expected to rise further we believe that margins would remain
capped at current levels. With the company having no interest cost
burden, an improvement in margins and sales would directly boost the
earnings growth. Hence, we have valued the stock at 20x its FY13E EPS,
and assigned it a BUY rating with a target price of | 1048.
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