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Multi Baggers

Hem Securities

12.00 AM Feb 13th 2012

Kansai Nerolac

BSE ID : 500165     NSE ID : KANSAINER

RECOMMENDED PRICE 880.00

PEAK FROM RECO 608.00 -30.91%

CURRENT PRICE 420.05 52.27%

Kansai Nerolac has been a cherished name in millions of households across the length and breadth of India. The company manufactures a diversified range of products for every surface.

Kansai Nerolac Paints

Kansai Nerolac has been a cherished name in millions of households across the length and breadth of India. The company manufactures a diversified range of products for every surface. It is the second largest coating company in India and the market leader in automotive and powder coating.

The Mumbai-based company is the leader in the industrial paints segment with a market share of over 40%. It is the third-largest player in the decorative paints segment with a modest market share of 13%. Nearly 75% of the Indian paints industry comprises of the decorative segment.

The company has registered smart numbers for the quarter ending December 2011. The company's net sales has increased to Rs 6655.90 million for the third quarter ended December 31, 2011, compared to Rs 5603.80 million for the same period previous fiscal, up by about 19%. Operating profit surged up to Rs.806 million from the same quarter previous year of Rs.687.50 million; a hike of 17.24%; while on a sequential basis it has seen a fall. The company’s performance has been impacted by high input costs and a slowdown in volume growth due to a slump in the auto industry. Net profit surged about 27% y-o-y to stay at Rs.526.80 million from Rs.415.90 million clocked in a year ago quarter.

Going by the industry trend, KNPL’s management expects a similar double-digit growth in revenue in the next quarter as well. KNPL has been able to focus on the decorative and non auto liquid business, while consolidating its leadership in the Automotive and powder coatings business.

Valuation

With increased focus on expanding capacities while maintaining its leadership position in industrial paints segment and growth in line with industry standards; KNPL’s future prospects looks promising. We believe KNPL is trading at an attractive valuation at 21.33x and 18.18x of FY12EPS of Rs.41.72 and FY13EPS of Rs.48.95.

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advise. Reader is requested to rely on his own decision and may take independent professional advise before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have acted upon or used the information prior to, or immediately following the publication.

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