Kansai Nerolac surges 10% on healthy Q4 earnings; recommends 1:2 bonus

Shares of Kansai Nerolac surged 10 per cent to Rs 443.45 on the BSE in Tuesday’s intra-day trade after the company’s profit after tax (PAT) zoomed 194 per cent year-on-year (YoY) to Rs 94 crore on account of strong operational performance.

The company also declared issue of bonus equity shares in the ratio of 1:2 i.e. 1 bonus equity share for every 2 equity shares held in the company, subject to shareholders’ approval.

Further, the board recommended a dividend of 270 per cent (Rs 2.70 per share) for the financial year ended March 31, 2023, as compared to total dividend of 225 per cent (Rs 2.25 per share) in the previous year.
 

In Q4, net revenue grew 13.6 per cent YoY to Rs 1,605 crore led by a revival in demand and new product launches. The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin improved 363 bps YoY to 9.5 per cent supported by better operating leverage.

The management said during the quarter all businesses have done well. Though raw material prices have softened, for the year, inflation is still positive. Judicious cost management efforts were continued. This along with various initiatives undertaken in previous quarters have led to the gross margins improving both over the corresponding quarter last year and sequentially. Looking forward demand is expected to remain healthy in the near term, the management said.

On industry outlook, Kansai Nerolac said the size of domestic paint industry is estimated at around Rs 70,000 crore as of March 2023. The good growth in infrastructure, core sector as well as automobile and real estate is likely to have a positive effect on the overall demand of paint for the industry in the long run.

ICICI Securities believe, improvement in margins is mainly due to higher advertisement expenses amid rising competition in the paints industry. The brokerage firm said it await management commentary on demand and sustainable margin outlook, going forward.