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Kansai Nerolac Paints rises 3%; CLSA initiates buy, sees 24% upside as margin to sustain

November 23
22:05 2017
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Kansai Nerolac Paints share price gained more than 3 percent intraday Thursday after CLSA has initiated coverage with a buy call on Kansai Nerolac, with a target price of Rs 600 per share, implying potential upside of 24 percent.

The company has a high leverage to capex revival which augurs well at this point for it, CLSA said, adding the margin is expected to sustain though input prices are on an uptrend.

“We do not see significant risk to peak margins,” it said.

The research house expects price hikes, improvement in revenue mix and operating leverage to sustain margin.

It expects 16 percent revenue CAGR over FY17-19 and 17 percent EPS CAGR over FY18-20, driven by price hikes, operating leverage and cost savings.

With just 12 percent market share, there is potential to drive market share gains, CLSA feel.

“We view high valuations with long term opportunity, strong balance sheet and high governance levels,” it said.

At 11:58 hours IST, the stock price was quoting at Rs 492.30, up Rs 9.20, or 1.90 percent on the BSE.

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