PL First Cut - Kansai Nerolac 2Q24

PL First Cut – Kansai Nerolac 2Q24 – Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd

Kansai Nerolac 2Q24 – below estimates due to slower volume recovery

(CMP: Rs315|Accumulate)

Financial Performance

> Revenues grew by 1.7% YoY to Rs18.5bn (PLe: Rs19.6bn)

> Gross margins expanded by 707bps YoY to 35.7% (Ple: 35.7%)

> EBITDA grew by 36.8% YoY to Rs2.7bn (PLe:Rs2.99bn); Margins expanded by 375bps YoY to 14.6% (PLe:15.3%)

> Adjusted PAT grew by 53.4% YoY to Rs1.8bn (PLe:Rs2bn)

Other Updates

> This quarter witnessed moderate demand in Automotive vs Q2FY23, however demand was down sequentially

> Performance coating fared better compared to Automotive in Q2, while demand for powder coating remain subdued.

> Decorative business was affected due to monsoon and delayed festive season, though it has started to gain traction ahead of robust festive season.

> Kansai continues to pursue its initiatives by involving feet on street, digital interventions, influencer outreach, new product launches, approvals, and projects which have gathered momentum

> Raw Material prices remain stable in 2Q24 which led to improvement in gross margins on YoY basis.

> This quarter saw an improvement in Product mix led by premium products

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Result were a miss on our estimate due to monsoons and delayed festive season. We estimate volume growth of 2.7% for Q2. We expect margin recovery to sustain in the coming quarters given stable RM prices. We expect recovery in volumes led by festival season. We have an Accumulate rating on the stock.

Stock trades at 28.7x FY25 EPS