Firstcall are 'overweight' in Kansai Nerolac Paints

Firstcall India Equity | March 22, 2016, midnight


SYNOPSIS


- Kansai Nerolac Paints Ltd (KNPL), a subsidiary of Kansai Paints Co. Ltd., Japan was established in the year 1920. It is the 2nd largest coating company in India and the market leader in Industrial coatings.


- During Q3 FY16, net profit increased by 28.57% and stood at Rs. 844.20 million as against Rs. 656.60 million in the corresponding quarter ending of previous year. Revenue for the quarter increased by 9.10% to Rs. 9680.60 million from Rs. 8873.40 million, when compared with the prior year period.


- During Q3 FY16, EBIDTA is Rs. 1423.90 million as against Rs. 1120.50 million in the corresponding period of the previous year.


- EPS of the company stood at Rs. 1.57 a share in Q3 FY16 against Rs. 12.18 in the corresponding quarter of the previous year.


- The company’s Net sales stood to Rs. 29391.50 million for nine months end of FY16 as compared to Rs. 27342.50 million for nine months end of FY15.


- For the end of 9M FY16, Net Profit increased by 30.30% and stood at Rs. 2753.30 million compared to Rs. 2113.00 million for the end of 9M FY15.


- Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 8% over 2014 to 2017E respectively.


OUTLOOK AND CONCLUSION


- At the current market price of Rs.281.15, the stock P/E ratio is at 42.79 x FY16E and 38.10 x FY17E respectively.


- Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 6.57 and Rs. 7.38 respectively.


- Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 8% over 2014 to 2017E respectively.


- On the basis of EV/EBITDA, the stock trades at 25.15 x for FY16E and 22.71 x for FY17E.


- Price to Book Value of the stock is expected to be at 8.02 x and 6.88 x for FY16E and FY17E respectively.


- Hence, we say that, we are Overweightin this particular scrip for Medium to Long term investment.

 

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