Asian Paints, Berger Paints, Kansai Nerolac: Which paint major to bet on post Q4 results?
While maintaining a ‘Buy’ call on Asian Paints, Systematix Institutional Equities in a report said that the paint major delivered weaker-than-expected Q4FY24 results.
- May 19, 2024,
- Updated May 19, 2024 11:57 AM IST
Analysts have mixed views on paint majors Asian Paints, Berger Paints and Kansai Nerolac after their combined net profit increased by 5% year-on-year (YoY) for the quarter ended March 31, 2024. The total net profit of paint majors jumped to around Rs 1,595 crore in Q4FY24 against Rs 1514 crore in the same quarter a year ago.
While maintaining a ‘Buy’ call on Asian Paints, Systematix Institutional Equities in a report said that the paint major delivered weaker-than-expected Q4FY24 results. The consolidated gross sales of Asian Paints declined marginally by 0.56% YoY to Rs 8,701.46 crore for the quarter ended March 2024. On the other hand, net profit increased by 1.83% YoY to Rs 1,256.72 crore during the quarter under review.
Despite double-digit volume growth of 10% from the decorative segment, Asian Paints’ topline remained impacted due to price cuts, down trading and weak demand sentiments.
Systematix Institutional Equities expects Asian Paints to continue to deliver strong double-digit volume growth in FY25, driven by a rural demand rebound, strong growth in low-economy categories (economy emulsions) and product launch initiatives in premium and luxury segments. The brokerage has set a target price of Rs 3,280 for Asian Paints.
Religare Broking also has a ‘Buy’ call on Asian Paints with a target price of Rs 3,465. Going ahead, management remains optimistic given the signs of a pickup in rural areas and also the focus remains on growing the bottom-of-the-pyramid products which have strong opportunities.
“We have maintained a ‘Buy’ rating with the revised target price due to correction in the stock price as well as the valuation,” Religare Broking said. The brokerage also has a ‘Buy’ call on Berger Paints which posted 19.61% YoY growth in consolidated net profit at Rs 222.10 crore in Q4FY24. On the other hand, gross sales increased 3.13% YoY to Rs 2,520.28 crore during the same period. Religare Broking has set a target price of Rs 627 for Berger Paints.
“Berger Paints reported decent numbers for the quarter. Further, management remains positive on the growth prospects which would be driven by double-digit volume growth for the decorative segment, steady demand, innovations and expansion in the distribution along with catch-up in rural areas will help in aiding growth. On the financial front, we estimate its revenue, EBITDA and PAT to grow at 12.5%, 6.1% and 16.5% CAGR over FY24-26,” the brokerage said.
On the other hand, HDFC Securities has a ‘Reduce’ call on Berger Paints with a target price of Rs 510. “Berger Paints continues to defend its market share (20%) amidst rising competitive intensity. However, a weak demand environment and heightened competitive intensity warrant higher brand investments and channel incentives. Hence, we cut our EPS estimates by 3-5% and retain our ‘Reduce’ rating with a DCF-based target price of Rs 510 per share,” HDFC Securities said in a report.
Kansai Nerolac, which outpaced Berger Paints and Asian Paints in terms of profit growth in Q4FY24, posted a consolidated net profit of Rs 116.03 crore for the quarter ended March 2024, up nearly 24% YoY. On the other hand, gross sales increased by 2% YoY to Rs 1769.39 crore. Religare Broking has a ‘Buy’ call on Kansai Nerolac with a target price of Rs 395. Shares of the company traded at Rs 277 on May 17.
“Kansai Nerolac posted mixed numbers for the quarter however they expect medium to long term growth to improve largely post elections driven by demand for both decorative and industrial segments, continuous innovation of products and categories and also their focus on gearing up distribution channels as well as increasing presence in South India. Cost fluctuation will be key monitorable, while management expects steady volume and margins for the near future. On the financial front, we expect its revenue and EBITDA to grow at a CAGR of 11.4% and 16.9% over FY24-26. We believe market share gain in industrial will continue along with strong demand for decorative segment,” Religare Broking said in a report.
On the other hand, Prabhudas Lilladher has a ‘Reduce’ rating on Kansai Nerolac with a target price of Rs 273. “We cut our EPS estimates by 0.5% and 6.3% for FY25 and FY26 given increased spending on advertising and distribution in changed industry dynamics, limited scope to increase margin as lower margin Industrial paints growing close to double digits and negative pricing to sustain in decorative paints,” Religare Broking said adding Kansai is making all the right moves with continues investment behind new products like paint plus, distribution expansion and NxtGen painting services, expanding product business.
It further said that Kansai Nerolac is on a strong wicket as revival in automotive paints and general industrial paints (infra-led) is aiding to growth and healthy margins. The paint major is also likely to gain from the revival in rural demand as it has more indexed to rural India than other larger players.
Analysts have mixed views on paint majors Asian Paints, Berger Paints and Kansai Nerolac after their combined net profit increased by 5% year-on-year (YoY) for the quarter ended March 31, 2024. The total net profit of paint majors jumped to around Rs 1,595 crore in Q4FY24 against Rs 1514 crore in the same quarter a year ago.
While maintaining a ‘Buy’ call on Asian Paints, Systematix Institutional Equities in a report said that the paint major delivered weaker-than-expected Q4FY24 results. The consolidated gross sales of Asian Paints declined marginally by 0.56% YoY to Rs 8,701.46 crore for the quarter ended March 2024. On the other hand, net profit increased by 1.83% YoY to Rs 1,256.72 crore during the quarter under review.
Despite double-digit volume growth of 10% from the decorative segment, Asian Paints’ topline remained impacted due to price cuts, down trading and weak demand sentiments.
Systematix Institutional Equities expects Asian Paints to continue to deliver strong double-digit volume growth in FY25, driven by a rural demand rebound, strong growth in low-economy categories (economy emulsions) and product launch initiatives in premium and luxury segments. The brokerage has set a target price of Rs 3,280 for Asian Paints.
Religare Broking also has a ‘Buy’ call on Asian Paints with a target price of Rs 3,465. Going ahead, management remains optimistic given the signs of a pickup in rural areas and also the focus remains on growing the bottom-of-the-pyramid products which have strong opportunities.
“We have maintained a ‘Buy’ rating with the revised target price due to correction in the stock price as well as the valuation,” Religare Broking said. The brokerage also has a ‘Buy’ call on Berger Paints which posted 19.61% YoY growth in consolidated net profit at Rs 222.10 crore in Q4FY24. On the other hand, gross sales increased 3.13% YoY to Rs 2,520.28 crore during the same period. Religare Broking has set a target price of Rs 627 for Berger Paints.
“Berger Paints reported decent numbers for the quarter. Further, management remains positive on the growth prospects which would be driven by double-digit volume growth for the decorative segment, steady demand, innovations and expansion in the distribution along with catch-up in rural areas will help in aiding growth. On the financial front, we estimate its revenue, EBITDA and PAT to grow at 12.5%, 6.1% and 16.5% CAGR over FY24-26,” the brokerage said.
On the other hand, HDFC Securities has a ‘Reduce’ call on Berger Paints with a target price of Rs 510. “Berger Paints continues to defend its market share (20%) amidst rising competitive intensity. However, a weak demand environment and heightened competitive intensity warrant higher brand investments and channel incentives. Hence, we cut our EPS estimates by 3-5% and retain our ‘Reduce’ rating with a DCF-based target price of Rs 510 per share,” HDFC Securities said in a report.
Kansai Nerolac, which outpaced Berger Paints and Asian Paints in terms of profit growth in Q4FY24, posted a consolidated net profit of Rs 116.03 crore for the quarter ended March 2024, up nearly 24% YoY. On the other hand, gross sales increased by 2% YoY to Rs 1769.39 crore. Religare Broking has a ‘Buy’ call on Kansai Nerolac with a target price of Rs 395. Shares of the company traded at Rs 277 on May 17.
“Kansai Nerolac posted mixed numbers for the quarter however they expect medium to long term growth to improve largely post elections driven by demand for both decorative and industrial segments, continuous innovation of products and categories and also their focus on gearing up distribution channels as well as increasing presence in South India. Cost fluctuation will be key monitorable, while management expects steady volume and margins for the near future. On the financial front, we expect its revenue and EBITDA to grow at a CAGR of 11.4% and 16.9% over FY24-26. We believe market share gain in industrial will continue along with strong demand for decorative segment,” Religare Broking said in a report.
On the other hand, Prabhudas Lilladher has a ‘Reduce’ rating on Kansai Nerolac with a target price of Rs 273. “We cut our EPS estimates by 0.5% and 6.3% for FY25 and FY26 given increased spending on advertising and distribution in changed industry dynamics, limited scope to increase margin as lower margin Industrial paints growing close to double digits and negative pricing to sustain in decorative paints,” Religare Broking said adding Kansai is making all the right moves with continues investment behind new products like paint plus, distribution expansion and NxtGen painting services, expanding product business.
It further said that Kansai Nerolac is on a strong wicket as revival in automotive paints and general industrial paints (infra-led) is aiding to growth and healthy margins. The paint major is also likely to gain from the revival in rural demand as it has more indexed to rural India than other larger players.