(Reuters) – India’s Kansai Nerolac Paints posted a near 31% fall in second-quarter profit on Wednesday, hurt by muted demand due to heavy monsoons and as expenses were higher.
The company, majority owned by Japan’s Kansai Paint Co, said its consolidated net profit fell to 1.23 billion rupees ($14.6 million) in the three months ended Sept. 30 from 1.77 billion rupees a year earlier.
Kansai Nerolac’s revenue from operations fell 0.3% to 19.51 billion rupees during the quarter.
Moreover, its total expenses rose 3.3% to 17.95 billion rupees, weighing on profit margins.
KEY CONTEXT
Sluggish demand in Kansai Nerolac’s decorative segment was due to heavy and extended monsoons and it expects demand to improve in the second half, the company said in an exchange filing.
Paint companies have raised prices by 2%-2.5% during the quarter after heavy discounting in the previous quarters, analysts at Anand Rathi have said.
But their expenses were impacted by volatile crude oil prices, while costs of raw materials like additives increased, analysts have said.
Moreover, Grasim Industries’ entry in the paints business earlier this year has kept competition intensive in the sector.
Rival Berger Paints India missed quarterly estimates on Tuesday, also hurt by higher rainfall and as price hikes dampened demand.
PEER COMPARISON
Valuation (next Estimates (next Analysts’ sentiment
12 months) 12 months)
RIC PE EV/EBIT Revenue Profit Mean # of Stock to Div
DA growth growth rating* analysts price yield
(%) (%) target** (%)
Kansai 29.61 18.95 7.60 18.80 Hold 11 0.89 0.88
Nerolac
Paints Ltd
Asian Paints 52.89 36.07 7.53 1.53 Hold 34 1.02 1.13
Ltd
Berger Paints 48.39 30.50 8.59 7.22 Sell 19 1.03 0.65
India Ltd
Akzo Nobel 45.07 28.85 7.90 6.46 Buy 2 1.51 1.70
India Ltd
* The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell ** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
JULY-SEPTEMBER STOCK PERFORMANCE
— All data from LSEG IBES
— $1 = 84.3040 Indian rupees
(Reporting by Dimpal Gulwani; Editing by Savio D’Souza)
