Buy Kansai Nerolac; target of Rs 1027: Firstcall Research

Firstcall Research is bullish on Kansai Nerolac Paints and has recommended buy rating on the stock with a target of Rs 1027 in its March 31, 2012 research report.

"Kansai Nerolac Paints Ltd. is the second largest coating company in India and market leader in Industrial Coatings. It's Industrial Coatings it has a wide range of products in the Automotive, Powder, General Industrial and High performance Coatings space. Nerolac paint, as it is popularly known, is an established brand in decorative paints. Kansai Nerolac Paints Ltd is a subsidiary of Japan based Kansai Paint Company Limited, which is one of the top ten coating companies in the world. The technological edge of Kansai helps us constantly innovate and come up with products that meet consumer need gaps."

"Kansai Nerolac Paints Ltd disclosed results for the quarter ended Dec 2011. Net sales for the quarter increased by 19% to Rs.6656.90 million as compared to Rs.5603.80 million during the corresponding quarter last year. During the quarter, the company has reported Net Profit increased to Rs.526.80 million from Rs.415.90 million in previous year same quarter. The Basic EPS of the company stood at Rs.9.78 for the quarter ended Dec 2011."

"At the current market price of Rs 909, the stock is trading at 21.19 x FY12E and 18.17 x FY13E respectively. Price to Book Value of the stock is expected to be at 4.19 x and 3.41 x respectively for FY12E and FY13E. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.42.89 and Rs.50.04 respectively. Company's manufacturing units have received ISO 9001-2000, ISO-14001 and OHSAS-18001 for its quality management. The Manufacturing operations extend across India and are located in Bawal in Haryana, Lote in Maharashtra, Jainpur in UP, Chennai and hosur in Tamil Nadu. Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 18% over 2010 to 2013E respectively. Company has technically collaborated with two companies Kansai Paint Co. and Oshima Kogyo Co. of Japan. On the basis of EV/EBITDA, the stock trades at 12.90 x for FY12E and 11.26 x for FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend 'BUY' in this particular scrip with a target price of Rs 1027 for medium to long term investment," says Firstcall Research report.