PL Stock Report: Kansai Nerolac Paints (KNPL IN) - Company Update – Making right moves in competitive environment - Accumulate

Kansai Nerolac Paints (KNPL IN) - Amnish Aggarwal - Head of Research, Prabhudas Lilladher Pvt. Ltd.

Rating: ACCUMULATE | CMP: Rs330 | TP: Rs370

Company Update – Making right moves in competitive environment

Quick Pointers:

♦ Premium products share in decorative business has improved by 150bps due to 11 new launches and focused distribution and media spends

♦ Non-Auto Industrials have seen sustained growth led by Infra initiatives of GOI with increase in margins

We attended the India strategy Session of Kansai Paints, Japan (Mkt Cap USD3.6bn) where KPIL (Mkt Cap USD3.2bn) highlighted its key initiatives and growth strategies. KPIL is following a 360 degree growth strategy which involves 1) 11 new Deco launches aimed at increasing share of premium products 2) Distribution expansion with a focus to increase traction in less indexed south and west India 3) online incentive to influencers to push sales 4) technology led innovations in Auto paints (including EV) to increase traction 5) Extension of B2B segment to 75 cities 6) Technology backed products to sustain leadership in powder coatings and gain from rising Infra spends in other industrial paints including Railways 8) aim to increase share of waterproofing and allied segments from 5% to 10% of sales.

KPIL has been taking all the right steps, however valuations at 27.2xFY26 are factoring in expected increase in competition and consequent threat to market share and profitability post Grasim’s entry. We believe improving sales traction and profitability in Industrial paints (45% of sales), could be a saving grace given for KPIL given parent’s strength in Industrial Paints. We estimate 27.9% PAT CAGR over FY23-26 and 13.3% CAGR over FY24-26. Retain accumulate with target price of Rs370 based on 32xSept25EPS (Rs.351 earlier based on 32xFY25 EPS).

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