Asian Paints, Berger Paints, Kansai Nerolac: Evaluating Paint Majors Post Q4 Results

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Analysts hold varied perspectives on paint majors Asian Paints, Berger Paints, and Kansai Nerolac following their combined net profit increase of 5% year-on-year (YoY) for the quarter ending March 31, 2024. The collective net profit of these paint majors surged to approximately Rs 1,595 crore in Q4FY24 from Rs 1,514 crore in the corresponding quarter a year earlier.

While maintaining a ‘Buy’ recommendation on Asian Paints, Systematix Institutional Equities noted in a report that the company exhibited weaker-than-anticipated Q4FY24 results. Asian Paints’ consolidated gross sales experienced a slight decline of 0.56% YoY to Rs 8,701.46 crore for the quarter ending March 2024. However, its net profit increased by 1.83% YoY to Rs 1,256.72 crore during the same period. Despite a 10% volume growth from the decorative segment, Asian Paints’ revenue was impacted by price reductions, down trading, and subdued demand sentiments.

Systematix Institutional Equities anticipates Asian Paints to sustain robust double-digit volume growth in FY25, driven by rural demand resurgence, substantial growth in low-economy categories (economy emulsions), and initiatives in product launches within premium and luxury segments. The brokerage has set a target price of Rs 3,280 for Asian Paints.

Religare Broking also advocates a ‘Buy’ rating on Asian Paints, with a revised target price, citing corrections in the stock price and valuation. Additionally, Religare Broking extends its ‘Buy’ recommendation to Berger Paints, which reported a 19.61% YoY growth in consolidated net profit at Rs 222.10 crore in Q4FY24. Gross sales for Berger Paints increased by 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, emphasizing the company’s positive growth outlook driven by double-digit volume growth in the decorative segment, consistent demand, innovations, and distribution expansion, particularly in rural areas.

Conversely, HDFC Securities holds a ‘Reduce’ stance on Berger Paints, with a target price of Rs 510. The firm suggests that while Berger Paints continues to defend its market share amidst heightened competition, a weak demand environment necessitates increased brand investments and channel incentives. Consequently, HDFC Securities has revised its EPS estimates downward and maintains its ‘Reduce’ rating.

Kansai Nerolac, which surpassed Berger Paints and Asian Paints in profit growth in Q4FY24, recorded a consolidated net profit of Rs 116.03 crore for the quarter ending March 2024, marking a nearly 24% YoY increase. Gross sales also grew by 2% YoY to Rs 1,769.39 crore. Religare Broking has a ‘Buy’ recommendation on Kansai Nerolac with a target price of Rs 395, highlighting the company’s expectations for improved growth post-elections, driven by demand across decorative and industrial segments, product innovation, and distribution expansion.

However, Prabhudas Lilladher holds a ‘Reduce’ rating on Kansai Nerolac, with a target price of Rs 273. The firm has adjusted its EPS estimates downwards for FY25 and FY26 due to increased spending on advertising and distribution amidst evolving industry dynamics. Despite this, Prabhudas Lilladher acknowledges Kansai Nerolac’s strategic investments in new products, distribution expansion, and its favorable positioning to benefit from the revival in rural demand and specific industrial sectors.

In conclusion, while analysts hold differing views on the future prospects of Asian Paints, Berger Paints, and Kansai Nerolac post Q4 results, each company’s strategic initiatives and market positioning will likely play a crucial role in determining their performance in the coming quarters.

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