Kansai Nerolac shares rally 10% on strong Q4 results, bonus announcement

Shares of Kansai Nerolac Paints surged about 10 per cent during early trade on Tuesday after the paint manufacturer reported a strong performance in the period ended March 31, 2023. Along with quarterly earnings, the company board also announced the issue of bonus shares.

Kansai Nerolac Paints reported a jump of 402 per cent in its consolidated net profit at Rs 96.24 crore in the March 2023 quarter, which was Rs 19.17 crore in the year ago period, the company said in its regulatory filing. Its revenue from operations surged 12.81 per cent during the quarter under review to Rs 1,733.59 crore. It was Rs 1,536.60 crore in the same period last fiscal.

The company also announced issue of bonus shares in 1:2 ratio. It means all the eligible shareholders will get one bonus share for every two shares of the company held by them as of the given record date, which will be announced late. The corporate action is subject to shareholder's approval.

Shares of Kansai Nerolac Paints surged 10 per cent to Rs 443.45 on Tuesday following the announcements, before paring up its gains partially to Rs 417.80 at 10.20 am. The company was commanding a market capitalization close to Rs 25,000 crore. The scrip had settled at Rs 403.20 on Monday.

"We estimate volume growth of 10 per cent for the quarter against our estimates of 5.6 per cent. We expect the beat to be a result of soft base of -13 per cent volumes in 4QCY22 and increase in ad spends to drive growth in decorative paints," said Amnish Aggarwal – Head of Research, Prabhudas Lilladher

"Demand trends are expected to remain strong in the near term. We expect margins to further recover QoQ. We have an 'accumulate' rating on the stock with a target price of Rs 485," he added.

For the entire 2022-23, Kansai Nerolac's net profit jumped 36.52 per cent to Rs 468.47 crore. It was Rs 343.15 crore in FY22. Its consolidated revenue from operations in FY23 increased 18.42 per cent to Rs 7,542.73 crore from Rs 6,369.35 crore a year ago.

In its board meeting held on Monday, Kansai Nerolac's board has recommended a dividend of Rs 2.70 per shares, implying a yield of 270 per cent for the issue price Re 1 each for the financial year ended March 31, 2023. It is also subject to approval from the shareholders of the company.

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