This Large Cap Paint Stock Announces Bonus Issue And Dividend Of 270%, Gets An "Accumulate" Rating

The largest house paints provider, Kansai Nerolac Paints Limited, has declared to issue bonus shares and a dividend of 270% along with the March quarter results. This large-cap company reported a revenue of Rs 16.1 billion, a growth of 13.6 per cent year on year, above the estimates of Prabhudas Lilladher, a leading brokerage firm.

Prabhudas Lilladher has suggested that investors accumulate the shares of Kansai Nerolac, as it feels the company will significantly have higher volume growth in the next quarter. The brokerage also believes that the share price will hit the target of Rs 485 per share.

The company gross margins expanded by 359bps year-on-year (YoY) and 136bps quarter-on-quarter (QoQ) to 31.6 per cent as against the estimate of 32.5 per cent. But the reported EBITDA of Rs 1.5 billion was below the estimated value of Rs 1.8 billion. It grew by 83.8 per cent YoY, while the margins expanded by 363bps YoY but declined 148bps QoQ to 9.5%, below the estimates of 11.7 per cent.

The adjusted profit after tax has grown by 161.7 per cent YoY to Rs 0.9bn, lower than the brokering firm expected it to be Rs 1.1bn.

All businesses have done well. The company continued with growth initiatives in Decorative and Performance coating. Input prices have softened; However, inflation continues to be positive for the company. Efforts towards cost efficiencies continue coupled with various initiatives undertaken in previous quarters led gross margins to improve YoY/QoQ

Bonus Issue details

The directors of Kansai Nerolac in the board meeting held on Monday, May 10, 2023, decided to announce bonus shares in the ratio of 1:2 by increasing the authorized share capital of the company from Rs 66,50,00,000 to Rs 85,00,00,000. Once it gets approved by shareholders, it will be credited within two months

Dividend details

Lastly, the company declared a dividend of 270% (Rs. 2.70 per share) for the financial year ended 31st March 2023 as compared to the dividend of 225% (Rs. 2.25 per share) last year. The dividend will be payable on or after Friday, 30th June 2023, to those members whose names are noted in the Register of Members of the company as of Thursday, 25th May 2023, set as the record date.

Prabhudas Lilladher gives an "Accumulate" rating

According to the research note of the research analyst of Prabhudas Lilladher, healthy demand is expected to remain in the near term. " We estimate volume growth of 10 per cent for the quarter vs our estimates of 5.6 per cent. We expect the beat to be a result of a soft base of negative 13 per cent volumes in 4Q22 and an increase in ad spending to drive growth in decorative paints. 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 per share. The stock trades at 24.2x FY25 EPS."

Share price movement of Kansai Nerolac

The current market price of the Kansai Nerolac Paints Limited stock is Rs 407.10 per share, up by 0.97 per cent on an intraday basis while writing this. Its 52-week high is at Rs 535.90 per share while the 52-week low is at Rs 358.05 per share. Over a year the share price declined by 7.07 per cent while in three years it has risen by nearly 9.03 per cent.

Disclaimer:

The stocks have been picked from the brokerage report of Prabhudas Lilladher Pvt Ltd. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.