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- 09 May 2023
- ICICIdirect Research
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DEMAND PICK-UP, MARGIN RECOVERY DRIVE OVERALL PERFORMANCE FOR KANSAI
KANSAINER - 239 Change: -0.90 (-0.38 %)News: Kansai Nerolac's net revenue came in at ~Rs 1605 crore up, 13.6% YoY led by a revival in demand and new product launches. Gross margin improved 359 bps YoY (up 136 bps QoQ) to ~31.6% on account of lower raw material prices. The EBITDA margin improved 363 bps YoY to 9.5% supported by better operating leverage. PAT grew ~194% YoY to ~Rs 94 crore on account of improvement in EBITDA margin. For FY23, the company has declared a total dividend of Rs 2.70/share. The company also declared the issue of bonus equity shares in the ratio of 1:2
View: We believe Kansai reported healthy revenue growth in Q4FY23 supported by better demand and new product launches. On the margin front, although the recovery in gross margin is better than our expectations, EBITDA margin at 9.5% is the company's lowest margin reported in FY23. It is also lower than its pre-Covid EBITDA margin range of 13-15%. We believe, this is mainly due to higher advertisement expenses amid rising competition in the paints industry. We await management commentary on demand and sustainable margin outlook, going forward
Impact: Positive