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Thursday, December 8, 2011

Kansai Nerolac Paints Ltd:-Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Kansai Nerolac Paints Ltd

Story:Kansai Nerolac Paints Limited manufactures and sells decorative and industrial paints in India. It provides decorative paints for interior walls, including water-based emulsions and distempers, and solvent-based luster, flat oil, and enamel; and textured, emulsions, and cement paints for exterior surfaces of houses, architectural buildings, and bridges, as well as paints for woods and metals. The company also offers automotive coatings, including pretreatment chemicals, electro deposition primers, intermediate coats/primer surfacers, top coats, clear coats, touch-up paints, auto refinishing products, heat resistant paints, underbody paints and PVC sealants, and rapgard transit protection films; and general industrial coatings, such as P.T. chemicals, primers, top coats and lacquers, coil coats, and metal decoration coatings. In addition, it provides high performance coatings for offshore/onshore coatings, power, petroleum/petrochemical, infrastructure, and floor coating industries; and powder coatings for white goods, automotive components, furniture, and electrical industries. The company was formerly known as Goodlass Nerolac Paints Ltd. and changed its name to Kansai Nerolac Paints Limited in July 2006.At the CMP, the stock is trading at 17.x its FY13 estimated EPS.With the company being the leader in the industrial paints segment and extending its reach in the decorative segment,I believe that sales growth would continue to remain strong in next quarter. However, with rising commodity prices, crude oil and titanium dioxide and impact of rupee depreciation would pressurize margins going forward. However I believe commodity prices would cool off by first quarter of FY13, which should bring back margins at 16% in FY13. Considering margins pressure in near term,am valuing Kansai at 20% discount to the market leader Asian paints at 20x its FY13E EPS, and assigned it a Buy rating with a target price of Rs 1,016.

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